The U.S. Market For Medical Devices - MTS

The U.S. Market for Medical Devices.
Opportunities & Challenges for Swiss Companies.
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Swiss Business Hub USA 2004 - 2010
Table of Contents
1.
1.1.
1.2.
1.3.
1.4.
EXECUTIVE SUMMARY
OPPORTUNITY
CHALLENGES
MANAGING SUCCESSFULLY IN THE U.S.
SUMMARY

5
5
5
7
11
2.
2.1.
2.2.
2.3.
2.4.
INTRODUCTION
OBJECTIVES
THE SWISSMEDTECH PROJECT
MEDTECH SWITZERLAND
ACKNOWLEDGEMENTS
11
11
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12
3.
3.1.
3.2.
3.3.
3.4.
U.S. MEDICAL TECHNOLOGY INDUSTRY

FACTS AND FIGURES
U.S. PRODUCTION & CONSUMPTION OF MEDICAL DEVICES & DIAGNOSTIC PRODUCTS
R&D SPENDING BY MEDICAL TECHNOLOGY COMPANIES
M&A, VENTURE CAPITAL, AND IPO ACTIVITY IN THE MEDICAL TECHNOLOGY INDUSTRY
4.
4.1.
4.2.
U.S. HEALTHCARE INDUSTRY

FACTS AND FIGURES
THE NATIONS HEALTH DOLLAR
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5.
5.1.
5.2.
5.3.
5.4.
CARDIOVASCULAR
FACTS AND FIGURES
MAJOR PLAYERS & MARKET SHARE ESTIMATES
EMERGING TECHNOLOGIES
MAJOR COMPETITORS IN THE CARDIOVASCULAR MARKET

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6.
6.1.
6.2.
6.3.
ORTHOPEDICS
FACTS AND FIGURES
MAJOR COMPETITORS IN THE ORTHOPEDIC DEVICES MARKET
7.
7.1.
7.2.
7.3.
DIAGNOSTICS
FACTS AND FIGURES
MAJOR COMPETITORS
8.
8.1.
8.2.
8.3.
MEDICAL IMAGING
FACTS AND FIGURES
MAJOR COMPETITORS IN THE U.S. MEDICAL IMAGING MARKET
9.
9.1.
9.2.
9.3.
REHABILITATION EQUIPMENT
FACTS AND FIGURES
MAJOR COMPETITORS
LEADING CUSTOMER GROUPS
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65
10.
10.1.
10.2.
10.3.
DENTAL
FACTS AND FIGURES
MAJOR DENTAL MARKET PARTICIPANTS
MARKET OUTLOOK AND INDUSTRY TRENDS
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67
71
72
11.
11.1.
11.2.
11.3.
11.4.
11.5.
DRUG-DEVICE COMBINATION PRODUCTS

DEFINITION AND PRODUCT CATEGORIES
FACTS AND FIGURES
MAJOR PLAYERS
CONVERGENCE STRATEGIES
REGULATIONS

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12.
12.1.
12.2.
12.3.
12.4.
12.5.
12.6.
12.7.
12.8.
12.9.
12.10.
12.11.
12.12.
MARKETING TOOLS AND DISTRIBUTION CHANNELS

DEFINING DISTRIBUTION CHANNELS
MARKET SEGMENTATION

THE DECISION MAKERS
PURCHASING PROCESS
ROAD MAP FOR MARKET ENTRY
IMPORTANCE OF OPINION LEADERS
CLINICAL TRIALS
PUBLICATIONS
MARKETING PLATFORMS

LEVEL OF PRESENCE
AVERAGE MARGINS
CONSIDERATIONS FOR MARKET ENTRY
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15
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13.
13.1.
13.2.
13.3.
13.4.
13.5.
13.6.
13.7.
13.8.
MARKETING AGREEMENTS, STRATEGIC PARTNERSHIPS AND LICENSING

LEGAL ISSUES RELATED TO MARKETING IN THE UNITED STATES
MARKETING ARRANGEMENTS
MARKETING THROUGH A U.S. SUBSIDIARY OR BRANCH
GENERAL CONTRACT ISSUES
EXPLORING AND EVALUATING MARKET OPPORTUNITIES
MARKETING AND LICENSING OF PRODUCTS AND KNOW-HOW IN THE UNITED STATES
COOPERATION WITH U.S. COMPANIES
ACQUISITION OR DISPOSITION OF U.S. COMPANIES OR ASSETS
14.
14.1.
14.2.
14.3.
14.4.
14.5.
14.6.
14.7.
14.8.
14.9.
14.10.
REIMBURSEMENT

OVERVIEW
RELATIONSHIP OF PATIENTS, PROVIDERS, AND PAYERS

REIMBURSEMENT

ROLE OF INSURANCE

PRIMARY TYPES OF PRIVATE INSURANCE COVERAGE

TRENDS IN THE MANAGED CARE INDUSTRY

MEDICARE AND MEDICAID

COVERAGE DESCRIPTIONS

LINKS TO OTHER SOURCES OF REIMBURSEMENT INFORMATION

REIMBURSEMENT SPECIALIST COMPANIES

15.
15.1.
15.2.
15.3.
15.4.
15.5.
15.6.
15.7.
15.8.
15.9.

15.10.
15.11.

15.12.

15.13.
15.14.
SUBCONTRACTING OPPORTUNITIES

INTRODUCTION

OUTSOURCING TRENDS
CONSIDERATIONS BY OEMS IN CHOOSING AN OUTSOURCE PARTNER

OUTSOURCING ARRANGEMENTS
ACCESS TO U.S. CUSTOMERS
FDA REGISTRATION OF SUBCONTRACTORS

SUBCONTRACTING OPPORTUNITIES IN ORTHOPEDIC DEVICE MANUFACTURING

U.S. MANUFACTURERS OF ORTHOPEDIC DEVICES
IMPORTANT TRADE SHOWS AND PUBLICATIONS FOR ORTHOPEDIC
DEVICE OEMS AND CONTRACT MANUFACTURERS
SUBCONTRACTING OPPORTUNITIES IN CARDIOVASCULAR DEVICE MANUFACTURING

IMPORTANT TRADE SHOWS AND PUBLICATIONS FOR CARDIOVASCULAR DEVICE OEMS
AND CONTRACT MANUFACTURERS

OEM/SUBCONTRACTOR COLLABORATION TRENDS IN
REPROCESSING SINGLE USE DEVICES (SUDS)

SUBCONTRACTING OPPORTUNITIES FOR DENTAL INSTRUMENTS

SUBCONTRACTING OPPORTUNITIES IN MEDICAL ELECTRONICS

100
100
101
101
102
102
102
103
103
16.
16.1.
16.2.
16.3.
16.4.
16.5.
16.6.
IMPORTING INTO THE UNITED STATES

OVERVIEW

U.S. CUSTOMS AND BORDER PROTECTION (CBP)
THE ENTRY PROCESS
CLASSIFICATION AND VALUATION OF IMPORTED PRODUCTS
COUNTRY OF ORIGIN MARKING
PENALTIES AND COMPLIANCE ISSUES
108
108
108
109
110
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111
17.
17.1.
17.2.
17.3.
17.4.
17.5.
17.6.
17.7.
17.8.
FDA: BRINGING A MEDICAL DEVICE TO MARKET: PREMARKET REVIEW

INTRODUCTION
PMA 510(K) DISTINCTION
PRODUCT STATUS
MEDICAL DEVICE CLASSIFICATION
PREMARKET NOTIFICATION PROCESS 510(K)
PREMARKET APPROVAL
SUMMARY
CONCLUSION
18.
18.1.
18.2.
18.3.
18.4.

18.5.
PRODUCT LIABILITY LEGAL ASPECTS

THE LEGAL BASIS FOR U.S. PRODUCT LIABILITY
DAMAGES
PROCEDURAL ASPECT OF A U.S. PRODUCT LIABILITY
PRODUCT LIABILITY EXPOSURE THROUGH
MERGERS/CONSOLIDATIONS AND ACQUISITIONS
REDUCING THE RISK OF PRODUCT LIABILITY
19.
19.1.
19.2.
19.3.
19.4.
19.5.
ANNEXES
ANNEX I: LINKS TO DATA SOURCES
ANNEX II: TRADE ASSOCIATIONS, TRADE SHOWS, AND PUBLICATIONS
ANNEX III - LIST OF MEDICAL ACADEMIES, SOCIETIES, AND OTHER PLATFORMS
ANNEX IV: END NOTES
ANNEX V: THE AUTHORS OF THE STUDY

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1. Executive Summary
Erwin Locher, President, Medtech Switzerland and
Patricia Scheller, Senior Advisor, Medtech Switzerland
1.1. OPPORTUNITY
The United States is the largest consumer of
medical devices in the world with a market valued
at more than $100 billion in 2008, roughly 42%
of the worlds total, compared to 25% for the
entire European Union.1 Medical devices sales are
projected to reach $185.9 billion by the year 2019.2
The U.S. spends a larger percentage of GDP and
more per capita on healthcare than any other
country. In 2009, a record $2.5 trillion (17.3%)
of GDP was spent on healthcare an average of
$8050 per person. National health expenditures are
projected to increase an average of 6.3% annually
through 2019 reaching 19.6% of GDP by 2019.3
Over the past decade, the value of medical devices
imported into the U.S. has steadily increased and
in 2008 imports were valued at $33.6 billion,
or one-third of the entire market. In certain
market segments, such as the surgical and medical
instruments category, double-digit growth has been
achieved for close to a decade.
For the Swiss Medtech industry access to this
large and important market can represent a
signficant opportunity to increase revenues and
gain economies of scale. However, entering the
U.S. market can be fraught with challenges and
a successful entrance into this attractive market
requires careful attention to the specific legal,
regulatory and cultural trends unique to the U.S.
And, as an unprecedented confluence of changes
converges to reshape the U.S. market, knowledge of
the forces that are impacting the market is critically
important to facilitating a smooth market entrance.
The purpose of this report is to help Swiss
companies seeking to enter the U.S. medical
technology market. In addition to highlighting
seven major market segments selected in
consultation with various experts from the
Swiss medical industry, it covers important
topics of common interest to all medical device
manufacturers and marketers.
1.2. CHALLENGES
Several seemingly disparate trends, from changes to
the regulatory and reimbursement process, to a shift
in the way hospital purchasing decisions are made,
to the implementation of comparative effectiveness
research, will ultimately force medtech companies to
be innovative not only in developing their products,
but also in the way they build their business model.
The trends fall into three major categories:
1) economic; 2) public policy; and 3) regulatory.
Economic Trends: As the U.S. emerges from

the economic crisis the U.S. medical technology
industry is facing enormous changes. While the
financial downturn affected industries across the
entire economy, the medical technology segment
experienced less damage and certain sub-segments
even thrived, such as implantable devices and
medical supplies. However, the steady rise in
healthcare costs, which now account for more
than 17% of the U.S. economy, is not sustainable.
Serious cost containment efforts will undoubtedly
change the market dynamics in the very near future.
The economic slow-down has significantly impacted
the customer base, both individuals and hospitals/
clinics. Discretionary medical spending has
declined as consumers seek to deleverage their
personal finances, affecting such areas as aesthetic
procedures and elective surgeries. In the hospital
market, the old paradigm of the physician as arbiter
of value is shifting to a system in which government
and private insurers increasingly determine what
will be bought and at what price. Where hospitals
retain the purchasing decision, they are reducing
the number of options and developing more robust
procurement processes.
Policy Trends: The recently enacted Patient
Protection and Affordable Care Act, also known
as Healthcare Reform (HCR), could have a major
impact on the entire value chain of the medtech
industry into the foreseeable future. However, the
HCR Act itself faces an uncertain future. The
House of Representatives voted to repeal the Act,
however a similar bill failed to pass the Senate.
The House of Representatives is now focused on
defunding major segments of the bill which could
delay implementation.
On the judicial front, twenty-six states have sued to
rescind the law and a federal judge has ruled that
the individual mandate requiring the purchase of
health insurance violates the U.S. Constitution,
and that since the individual mandate is central to
the workings of the health-overhaul law, it is not
severable from the whole and therefore the whole
law is unconstitutional. This ruling throws the
validity of the entire act into question and goes
further than any other court decision to date. (So
far two courts have declared the Patient Protection
and Affordable Care Act unconstitutional and
two have declared it does comply with the
Constitution.) According to some legal experts4
this latest judgment binds the parties to the suit,
which includes 26 states, the National Federation of
Independent Business and the federal government
and means that, absent a court-issued stay, HCR
cannot be further implemented as it pertains to

these 26 states. Unless the U.S. Supreme Court can
be convinced to give an expedited ruling, the court
challenges and appeals are expected to continue
until a likely final decision in 2012.
Therefore it is prudent to assume that the Act will
be the law to which medical technology companies
will need to adhere.
The impact of HCR is expected to play out over
several years and have far reaching consequences.
It is expected to increase by 32 million individuals
the number of Americans covered by health
insurance by 2019, and subsequently many experts
predict it will result in an increase in the number of
medical devices utlized each year.
While HCR may substantially increase the market
opporunity, it also imposes new mandates on
individuals, employers, medical service providers
and manufacturers of healthcare products
increasing the complexity of the regulatory
environment. In the coming years companies
seeking to enter the United States market are likely
to encounter a more challenging environment than
has historically been present. Expert guidance and
local advocacy will become increasingly important
to countries and companies seeking access to the
worlds largest medtech market.
Among the many impacts of the Act are the
following items which should be carefully
considered as Swiss companies contemplate their
market strategy in the U.S:
Medical Device Excise Tax: This new tax is
scheduled to go into effect on January 1, 2013 and
will impose a 2.3% tax to the sales of all medical
devices. Included in the definition of medical sales
are sales revenue, leases, and rentals of medical
devices for human use. Imports are subject to
the tax, however sales of components for use in
further manufacturing are exempt. Certain retail
exemptions were allowed, but currently only apply
to eyeglasses, contact lenses and hearing aids. The
U.S. treasury is authorized to include other devices
routinely purchased by consumers at retail location,
but further guidelines and regulations must first be
promulgated.
than medical technology. With the February 2009

passage of the stimulus spending package that
has changed. Over $1.1 billion of the package
was allocated to CER, much of it targeted for
the medtech industry. As of June 2010 the list
of devices targeted for CER included imaging
technologies, stents, and robotic assisted surgical
products, as well as many others. The passage of
HCR underscored the commitment of the current
administration to CER, mandating the creation of
a Patient-Centered Outcomes Research Institute
to set priorities for and to publicize research
comparing health outcomes, clinical effectiveness
and risks of various medical treatments and
interventions.
Companies will need to ensure that clinical trials
required to secure FDA approval incorporate the
appropriate controls and result in sufficient data
being collected to address CER requirements.
Payment Reform: In an effort to curtail
the increase of healthcare costs the Centers for
Medicare and Medicaid Services (CMS) is seeking
to reform the current fee-for-service model by
testing new payment and care delivery models.
As part of HCR, the Center for Medicare and
Medicaid Innovation will be established to test
numerous different models. Assessment of various
models has shown that different models impact
key aspects of the market, such as pricing, sales
volume, and innovation, differently.6 It is likely that
the cost-reduction focus of all the models being
contemplated will put downward pressure on
the pricing and sales volume of exisitng devices.
Depending upon the model selected, it could also
drive greater opportunity for products aligned with
the goals of the new payment and care model.
The impact of these changes on different segments
of the medical technology industry cannot be
assessed until further guidelines and regulations
have been put in place.
Regulatory Trends: In addition to the expansive
legislative reform taking place there are several
regulatory and enforcement initiatives being
proposed and implemented.
Ernst & Young predicts that this could lead to

the unbundling of products that have multiple
components in an attempt to limit the tax
obligation. However, such a tactic could be
complicated by the fact that removing certain
components, such as a keyboard used to enter data,
would potentially subject the component to state
and/or local sales tax.5
510(k) Reform: In response to criticism that

higher risk products are seeking less rigorous
regulatory approvals, the FDA has reviewed the
approval process and in August 2010 released
preliminary recommendations for changes. Among
the changes is the creation of a new Class of
medical device, Class IIb which could include
implantable or life-sustaining/life-supporting
products and require clinical and manufacturing
data similar to that required by Class III device
submissions.
Comparative Effectiveness Research:

While not a new concept, Comparative
Effectiveness Research (CER) has been associated
more closely with the pharmaceutical industry
The recommendations also call for clarifying the

conditions under which mutliple predicate devices
can be used to determine whether or not a new
product is substantially equivalent to an existing
device. The proposal would eliminate the practice

of using split predicates which is when one
predicate device is referenced for its technological
similarities to the new product and another
predicate device is used to address the intended use
of the new product.
For a complete explanation of the U.S. regulatory
process and associated definitions please refer to
Chapter 17.
Innovation Pathway Program: The FDA
recently announced it would aim to review firstof-a-kind devices in five months, which is half
the time currently spent reviewing most new
devices. Under the program, the FDA would begin
corresponding with device scientists in the early
stages of development, helping them design studies
to show the safety and effectiveness of their devices.
Makers of devices accepted into the new program
will receive a written agreement from the agency
with a target approval date and a roadmap for
reviewing the product. The devices will be reviewed
by a special committee within the FDA made up of
experienced scientists and managers. The timeline
for implementating this program has not been
finalized. It is still in the formative stages.
Pilot Recall Program: The FDA is also
contemplating instituting a pilot program under
which they could require companies to recall older
versions of products after newer models have been
introduced, even if there are no complaints or
adverse events associated with the older products.
This program is still in the formative stages and has
not yet been implemented.
Risk Management: Existing regulations
require companies developing new products to
undergo a comprehensive assessment of how
the device could fail, the implications of device
failure and the steps the company will take to
mitigate the identified risks. Increased focus
on risk management has occured over the past
year, as noted by a 400% increase in the number
of warning letters the FDA issued with risk
managment citations following mandatory FDA
audits.
National Medical Device Registry: The
2011 budget for FDA includes $4 million earmarked
for the establishment of the National Medical
Device Registry. This new intiative is intended to
link Unique Device Identifiers for each medical
product to electronic data from a variety of
sources, in an effort to assess post-market safety and
effectivess and help manufacturers alert patients
if adverse events occur. The registry expands the
current FDA tracking responsibilities to include all
Class III devices and devices that would fall into the
new Class II category those that are implantable,
life-supporting or life-sustaining. While not yet
initiated, the inclusion of money in the budget for
implementation indicates there is a good chance the
FDA will proceed if its funding is not withdrawn by

the 112th Congress.
While these trends have the potential to increase
the cost and time necessary to bring the products
to market, companies that sell medical devices in
the U.S. have begun what are known as lobbying
efforts to mitigate the impact or reverse potentially
damaging regulations and legislation. Lobbying
is the attempt to influence decisions made by
legislators and officials in the government by
individuals, other legislators, constituents, or
advocacy groups.
Swiss medical device companies should be aware
of lobbying efforts by competitors and industry
associations to influence legislation and policy
decisions that are passed at the federal and state
levels.
AdvaMed, the largest medical technology
association in the world, is based in Washington
DC. It advocates for a legal, regulatory and
economic environment that advances global
healthcare by assuring worldwide patient access
to the benefits of medical technology. They
espouse policies that foster the highest ethical
standards, rapid product approvals, appropriate
reimbursement, and access to international
markets. They provide the voice for medical
device companies during policy debates and can
influence the discussion and outcome of pending
legislation and regulatory initiatives. AdvaMed is
currently lobbying on behalf of its medical device
manufacturer members to get the medical device
excise tax repealed before its implementation in
2013. The organization is also heavily involved
with voicing the opinions of its members
concerning potential modifications to the 510(k)
premarket notification process.
1.3. MANAGING SUCCESSFULLY IN THE
U.S. The challenges and costs to enter the U.S.
medical device market can be substantial, however
once overcome, the opportunities are great. After a
company decides that it will enter the U.S. market,
it is important to assess the most efficient way to
enter the market and successfully manage through
the complexities inherent in the territory.
Some of the most common mistakes made when
entering the market include underestimating the
requirements of the regulatory and compliance
processes, disregarding the importance of
reimbursement and obtaining payment, inability to
establish effective distribution channels in a large
and diverse country, not exercising sufficient caution
for the product liability landscape, failure to take
into account federal and state laws and import
regulations. Each of these areas is dealt with in
some detail in the chapters that comprise this report
and summarized below:
FDA Regulatory and Compliance Processes
The FDA regulatory process can be costly, complex,
time consuming, and unpredictable. According

to a November 2010 Stanford University report,
more than 75 percent of the cost to bring a medical
device from concept to the U.S. market is spent
clearing regulatory hurdles. The study estimates
the average total cost to bring a low- to moderaterisk 510(k) device from concept to approval was
approximately $31 million, with $24 million spent
on FDA dependent and/or related activities. For a
higher-risk premarket approval (PMA) device, the
average total cost from concept to approval was
approximately $94 million, with $75 million spent
on stages linked to the FDA. The time spent to
obtain FDA clearance for a device is considerable as
well. On average it takes 10 months from the first
filing to clearance for a 510(k) application and 54
months from the first communication to clearance
for a PMA submission. For this reason, the 510(k)
process is more widely used than the PMA pathway.
In 2009, the FDA approved approximately 3,000
products under the 510(k) application process, but
only 15 original PMA submissions.7
Despite efforts at harmonization and a
Memorandum of Understanding, Swiss medical
device manufacturers can only gain entry to U.S.
markets through the same regulatory process
required of all U.S. device manufacturers. Swiss
medical device companies that wish to export
devices to the U.S. must follow good manufacturing
practices (GMPs), are required to register their
establishments, and list their devices with the FDA.
In addition, they are subject to the same compliance
requirements and must submit to FDA audits as
outlined in the regulations.
Reimbursement
It is important for device manufacturers to develop
a long-term strategy for reimbursement as well as
a plan to implement, monitor, and analyze these
strategies. In the U.S., approval of a medical device
for marketing by the FDA does not guarantee
that a third party payer (e.g., Medicare, insurance
company, health plan) will provide coverage and
reimbursement for that device. It is therefore,
imperative that Swiss medical device manufacturers
understand the various major components, entities,
and market dynamics that affect the payment and
reimbursement for medical products.
Reimbursement rates for Medicare and Medicaid
are made through the Centers for Medicare and
Medicaid Services (CMS). CMS makes coverage
decisions that dictate what will be reimbursed by
the government, making it both a regulator and a
purchaser of medical devices.
Private insurers responsible for reimbursement to
most patients are not bound by CMS coverage
decisions, but do not typically deviate from them
without cause. Private payers often cover items
not yet addressed by CMS, and adjust their
reimbursement rates more quickly. But because
there are myriad private insurers, presenting a
device for approval can be costly. Therefore,
favorable CMS coverage decisions are critical

to device companies regardless of whether
government reimbursement applies. FDA and
CMS are separate government agencies but each
influences the other. For example, CMS is unlikely
to reimburse a medical device that has not been
approved through FDA.
Often, payers either perform or contract out for
technology assessments to determine the costeffectiveness of covering a particular device. Since
each third party payer has its own process to reach
coverage decisions, it is recommended that a
medical device manufacturer take up direct contact
with those entities that are directly involved in the
evaluation and decision process.
Market Entry
Companies should carefully consider the various
alternative options for entering the U.S. market.
There are a number of options which could be
suitable for establishing a beachhead in the U.S.
These include setting up a wholly owned subsidiary, a
joint-venture, importer-distributor arrangement, sales
agent arrangement, acquiring a company, various
types of licensing agreement alternatives, or doing
subcontract work for U.S. OEMs. Each alternative
offers advantages and disadvantages.
Each market segment has unique distribution
patterns that will influence the selection of a
particular channel strategy. In the dental market
the large number of dental clinics and laboratories
necessitate the use of distributors. At the other
extreme is the orthopedics market where most
companies go direct, and a market entry with a
dealer is almost impossible, even locally.
Understanding the specific market requirements
and customer purchasing patterns is crucial to
establishing the right market entry strategy.
Setting up a wholly owned subsidiary requires
significant capital investment, but it also provides
the most control over personnel, regulatory process,
transfer pricing policy, and allows for a more
transparent assessment of tax liabilities with U.S.
authorities. For Swiss companies, a subsidiary in
the form of a corporation, rather than a branch,
typically is the desirable form for a physical presence
in the U.S. Otherwise, the Swiss parent company
may directly become subject to taxation in the U.S.
Swiss companies can also market products in the
U.S. through intermediaries such as sales agents
and distributors. These intermediaries can be
either independent third parties or related parties
such as joint ventures or subsidiaries. Agents
are independent contractors who solicit sales
of products or services of a domestic or foreign
company for a commission, typically calculated as
a percentage of gross sales. Distributors purchase
goods or services from a manufacturer or service
provider and resell them at a mark-up to other
distributors, wholesalers or retail customers.
Using distributors and/or sales agents requires
less initial financial investment, but on the other
hand, requires careful consideration in the way

contracts are established. Swiss companies should
avoid agreements that give their U.S. representative
control of their regulatory process or involve
lengthy commitments. These types of contracts
are a big disadvantage for the manufacturer
because they may result in mistakes and/or delays
in the regulatory process and may not allow for
termination in the event of unforeseen market
changes or a dissatisfactory partnership.
Many Swiss companies want to work with a single
distributor or agent that can cover the entire U.S.;
however, this is usually not feasible because for most
market segments U.S. medical device distributors
and agents operate in a specific market niche and in
a limited geographical area. Swiss companies often
underestimate the large geographical size of the
U.S. and the subsequently lower population density.
The U.S. has a population density of around 86
persons/km2 compared with 190 persons/km2 in
Switzerland and 231 persons/km2 in Germany.
Thus distribution models that work well in Europe
do not necessarily work well in the U.S. Swiss
companies seeking to enter the U.S. market should
seriously consider focusing on a specific region of
the country as a first step. After a product sales
history has been established in a single region, it
also becomes easier to find additional sales agents
and distributors in other regions. For some market
segments, such as the dental market, nationwide
dealers (e.g., Schein, Patterson) do exist in addition
to many regional and local dealers.
distributor or agent search. However, they should

also have some flexibility in the strategy in order
to conduct successful negotiations with potential
partner companies.
When Swiss manufacturers work with U.S.
distributors, it is important that both parties
contribute something to the relationship in order
to show that there is a commitment from both
sides. In addition, once a business relationship has
been established, it is important that both parties
continue to meet several times per year. The Swiss
company should come to the U.S. periodically
to work with the U.S. distributor and the U.S.
distributor should come to Switzerland periodically
for product training and to nurture the relationship.
Acquisition of a U.S. company enables a quick
entrance into the U.S. market, but it also carries
some potential risks. A Swiss medical device
manufacturer may become exposed to product
liability claims resulting from medical devices that
the U.S. company has sold either before or after the
acquisition. As such, (1) Swiss manufacturers should
conduct very careful due diligence to determine the
extent to which product liability claims have been or
may be asserted against the U.S. company; and (2)
Swiss manufacturers should seek expert legal advice
regarding structuring the transaction in order to
minimize the likelihood that its assets will become
subject to product liability claims resulting from the
U.S. companys operations.
There are additional considerations that Swiss

companies should be aware of as they seek to work
with U.S. distributors and/or sales agents. If similar
products or technologies are already available in
the U.S. by domestic suppliers, there is little reason
for a U.S. company to want to import the product.
However, if similar products or technologies are
not already available in the market, U.S. companies
may still be reluctant to take on the risk of working
with a foreign supplier because they are highly
dependent on the foreign exporter for supplying the
product, technical know-how, and timely answers
to questions. In addition, U.S. distributors and
sales agents are concerned that if the going gets
tough the foreign supplier will just pull out of the
market and leave them hanging. Such an action
could damage their reputation and make them look
bad to their customers. Due to the high retreat rate
of foreign companies that tried to enter the U.S.
market but were not successful, U.S. companies
are often reluctant to risk additional exposure. It
is important for Swiss companies to research their
specific market segment to determine their best
channel options and for those companies seeking
to work with distributors and/or sales agents, they
should develop a strategy that takes the issues
mentioned here into consideration.8
Subcontracting is also an attractive alternative

for many companies. There is a trend in device
manufacturing whereby OEMs are outsourcing a
larger portion of their production and assembly
operations to subcontractors because of market
pressure to reduce prices and shorten lead times.
There is also a trend toward integrated testing
beginning with the early product development
stage and continuing through to clinical validation.
OEMs that use these services range from small
start-up companies to the very largest in the
industry. While the major OEMs are always an
attractive candidate, a case can be made why Swiss
subcontractors should also focus on SMEs. Some
of those reasons are as follows: (1) U.S. startup companies often provide more cutting edge
technology than the major OEMs; (2) Start-up
companies may have a product concept, but do
not have a manufacturing facility or the machining
know-how to produce the device; (3) The process
of dealing with SMEs is often less bureaucratic
than that of the major OEMs; (4) Identification of
the appropriate contact persons is usually easier
in the case of SMEs; (5) Venture capital providers
may offer assistance in making contact with their
portfolio companies; and (6) Dealing with start-up
companies may provide a back-door access to large
OEMs since most start-ups are ultimately acquired
by the major OEMs.
Swiss companies should have a predetermined

strategy for after sales service prior to doing a
If a Swiss medical device manufacturer is

considering a potential business arrangement with
a U.S. manufacturer of complementary products in

order to benefit from the U.S. companys national
sales force and key customer base, it may seem
like a good opportunity to gain quick access to the
U.S. market, but it is a risky option for two primary
reasons. First and foremost, the U.S. company will
be focused on selling its own products and may not
put much effort into selling the Swiss companys
product(s); and secondly, the U.S. company could
develop its own product(s) to replace the Swiss
companys product(s). Also in these types of
business arrangements the U.S. company may want
a reciprocal marketing agreement with the Swiss
company to distribute the U.S. companys products
in Europe. Swiss companies seeking to approach
U.S. manufacturers of complementary products
should be prepared to address these issues during
negotiations and contractually.
If a Swiss company wishes to establish a sales
office or subsidiary in the U.S., an important
question for consideration is: Should the U.S based
person in charge be from the parent company
in Switzerland or locally hired in the U.S.? The
answer to this question is complex and requires
various considerations. A person from the Swiss
based office most likely will have the greatest
passion, knowledge and understanding of the
technical aspects of the product(s) and the goals
of the company, but likely will not have an indepth understanding of the U.S. market and close
personal contacts with customers. On the other
hand, a person hired in the U.S. will likely have
an in-depth understanding of the U.S. market
and close personal contacts with customers, but
will not have the same level of passion, knowledge
and understanding of the product(s) and the goals
of the company. Here is where the decision lies.
Most companies cannot afford to hire two people
to gain the attributes of both. One possibility
would be to transfer a key person from the head
office in Switzerland to the U.S. to head up a
sales office that manages a group of sales agents,
distributors, or company sales force. It would
then be the responsibility of this person to provide
the appropriate direction, training and corporate
support to those sales personnel to develop the
market. The sales personnel would be U.S.
personnel selling to U.S. companies. A second
alternative would be to hire a U.S. based person
to lead the sales and service personnel and then
bring that person to Switzerland on a regular basis
for the appropriate corporate training. There is
no single correct answer to this question, but it
requires thorough analysis by the companys senior
management.
Product Liability
In the area of product liability, Swiss manufacturers
selling or distributing medical devices in the
U.S. should exercise particular care because U.S.
product liability law and court procedures are, in
numerous important respects, different from the
laws and procedures in Switzerland. In virtually
every respect, these differences are favorable to the

plaintiff and enhance the plaintiff s likelihood for
a substantial recovery. In addition, U.S. product
liability law is complicated by the following two
factors: (1) U.S. product liability law is almost
entirely the law of the 50 individual states; and (2)
U.S. product liability law is predominately case law
established by judicial rulings and not legislative law.
Federal and State Commercial Laws
Swiss medical technology companies that are
considering marketing products or services in
the U.S. should not only research the market
opportunities and risks from a commercial point
of view, but also from a legal point of view. In
addition to the FDA regulatory requirements, and
the laws governing intellectual property rights, the
impact of a number of federal and state laws (e.g.,
contracts, torts, and healthcare laws) on the planned
marketing activities and their tax implications
should be understood before beginning active
marketing in the U.S.
Import Regulations
The importation into the U.S. of medical devices,
and goods and products generally, is regulated
by the U.S. Department of Homeland Security
(DHS), Bureau of Customs and Border Protection
(Customs or CBP). Customs also enforces
the statutes and regulations of numerous other
governmental agencies that apply to the imported
merchandise. In the case of medical devices, it is
most likely that FDA regulations will be enforced
by Customs. Failure to properly observe FDA
requirements may result in detention, seizure of the
merchandise, and/or penalties up to three times the
value of the shipment. In addition, new initiatives
are constantly proposed by Customs regarding
security and compliance, and the U.S. Congress is
continually examining security issues by proposing
and considering related new legislation. Since these
programs develop quickly, it is imperative that any
company selling to the U.S. be familiar with these
programs so as to avoid any mis-steps or problems.
Since many issues may arise which require fine
technical distinctions or fall within gray areas of the
law, importers should invest time to obtain expert
advice prior to the importation of any product in
order to minimize potential problems.
Other Points for Consideration
Given the complexities of the market both
U.S. and non-U.S. based companies often seek
guidance from consultants and companies that
are focused on specific aspects of the development
and commercialization processes. It is possible
to identify and partner with U.S. companies that
can manage any phase of the entire process from
prototyping to sales and service. The key to
successfully managing in the U.S. is to maintain
control over those parts of the process deemed
most critical while seeking expert guidance in the
region. Whether companies choose to hire a local
representative(s) to oversee all or part of their
10
activities, or control all aspects of their U.S. business

from Switzerland, warrants serious contemplation at
the highest levels within the organization.
As a result of the current economic downturn,
finding highly experienced individuals in the
U.S. to support Swiss companies and their
commercialization efforts is much easier than it has
been historically. Finding and employing the best
talent in the U.S. can be done via referrals from
trusted colleagues, which often results in the best fit
and has the added benefit of usually being free of
charge, to utilizing specialized recruiters that will
charge an upfront retainer to locate, screen and
validate candidates. There are many recruiters
that specialize in healthcare and even more
specifically in market segments, such as diagnostics
or orthopedics. It is even possible to find recruiters
that have focused their efforts on specific functions
within a specific market, such as engineers focused
on developing cardiovascular implants, or different
levels within an organization, for example Vice
Presidents in the area of medical imaging. Using
AdvaMed or other trade organizations is another
alternative for identifying local talent. Many trade
organizations will list open positions for a small fee
on their website or in targeted emails they send to a
dedicated group of members.

1.4. SUMMARY.
While there are signficant challanges to entering the
U.S. medical device market it remains the worlds
largest and most dynamic healthcare market.
Success in this market can drive exponential growth
and meaningful economies of scale.
Medtech Switzerland was initiated to support
the concerns of Swiss businesses in their export
activities. In the U.S., as in many market areas,
regulatory and administrative structures are
strongly politically influenced, and the resulting
trade barriers make market entry very difficult. For
many Swiss companies market access is becoming
increasingly complex due to expanding regulations
and shifting market conditions. In order to boost
export sales, Medtech Switzerland was formed to
help Swiss companies overcome these hurdles.
Additional support in assessing specific
opportunities within the U.S. and how best to access
them is available through the Medtech Switzerland
platform. For more information please contact Dr.
Patrick Dmmler, Managing Director of Medtech
Switzerland, at:
contact@medtech-switzerland.com or visit the
website www.medtech-switzerland.com
2. Introduction
Martin von Walterskirchen, Swiss Business Hub USA
2.1 OBJECTIVES.
This report has been compiled through a
collaboration of Osec, Medtech Switzerland and
esteemed partners in both the public and private
sectors. On behalf of the all the contributors to
this report I hope that the information contained
herein proves helpful to Swiss companies seeking to
enter the U.S. medical technology market. While
this report was being assembled the U.S. market was
undergoing, and continues to undergo, significant
change. It is essential for companies entering the
U.S. market to become informed of the evolving
market conditions. Both Osec and Medtech
Switzerland stand ready to assist
2.2. THE SWISSMEDTECH PROJECT.
The Swiss Minister for Economy, Federal Councilor
Joseph Deiss, initiated the governments program to
promote innovation and entrepreneurship9 in June
2003. As he said on that occasion, Innovation
is a process that transforms ideas into marketable
goods and services. The SwissMedtech project
constitutes part of this program by assisting
entrepreneurs in their critical time to access the U.S.
market.
The study The U. S. Market for Medical
Technology Opportunities and Challenges for
Swiss Companies represents the point of departure
of the SwissMedtech project. The first edition
of the study was presented in 2004 in Switzerland

to over 70 companies and is now published for the
seventh time in an updated and amended version.
Since then, Swiss Business Hub USA, Osec Business
Network Switzerland, and other partners some
of them being co-authors of this report have
assisted Swiss companies in their endeavor to
enter the American medical technology market.
For this purpose, the brand SwissMedtech was
launched and registered. The SwissMedtech
Newsletter, published by Swiss Business Hub USA
since spring 2005 is mailed to over 1,700 experts
in the U.S. medical industry. During February
7-11, 2011, some of the most renowned Swiss
suppliers and manufacturers of precision state-ofthe-art machines and tools for the medtech industry
participated in the SwissMedtech Pavilion at the
Medical Design and Manufacturing Trade Show in
Anaheim, CA. The SwissMedtech Pavilion will
continue again in 2012.
2.3. MEDTECH SWITZERLAND.
Medtech Switzerland" is the export platform
for the Swiss medical technology sector and has
been developed by Osec on behalf of the federal
government in 2010. It provides support and
services for export activities to all businesses
throughout the industry.
Osec also incorporates various participants,
including Swiss Business Hubs at Swiss embassies
11
and consulates, related associations and federal

offices, multinational corporations, small and
medium-sized enterprises (SMEs), internationally
active consultants and bilateral chambers of
commerce.
The export platform for the medical technology
sector has been established within the framework
of the third stabilization package and is intended
to support the concerns of Swiss businesses in their
export activities. In many market areas, regulatory
and administrative structures are strongly politically
influenced, and the resulting trade barriers make
market entry for SMEs very difficult. In addition,
on behalf of the federal government, the export
platform is promoting a sector that has built up
an excellent technological base, thanks to clinical
research and first-class engineering and scientific
performance. Some businesses have already
succeeded in reaching a significant global market
position, but for many SMEs with comparable
technological conditions, market access has
become increasingly complex due to ever more
dense regulations. In order to boost export sales,
therefore, different hurdles must be overcome.
Medtech Switzerland" has been devised as an open
platform for the Swiss medical technology industry.
All participant businesses can use its services.
The association is led by the general assembly of
its members. The board of directors, in which
industrial partners as well as Osec are represented,
is responsible for the strategic leadership and
supervision. Erwin Locher (former President, CEO
Synthes/Mathys Medical) is president of the board
of directors.
The board has established its operative organization
with offices in Bern together with the Medical
Cluster, Bern. This association, founded in
1997, is a network organization of medical
technology businesses along the entire valueadded chain, including manufacturers, suppliers,
service providers, and research and development
companies. The Managing Director of Medtech
Switzerland is Dr. Patrick Dmmler.
To provide local support to export-oriented Swiss
businesses in their target markets, the export
platform is based on business partners that can meet
the highly specific requests concerning seniority,
specialist knowledge and experience in medical
technology, and quality of services. Therefore,
the preference is for the export platform to work
together with Osecs Business Hubs / Swiss
embassies.
Medtech Switzerland" provides relevant

information on major medical technology markets,
services and contacts to SMEs in our industry, and
thus promotes and facilitates entry into the relevant
export markets worldwide. The focus is to establish
effective relationships with public and private
customers in healthcare services, government
agencies and foreign medical technology companies,
with the purpose of building lasting business
relationships and generating export orders for Swiss
medical technology businesses. The marketing
activities contain a broad range of services
including the participation in relevant trade shows
and conferences in major markets, the formation of
work groups to exchange relevant export know how
or the organization of buyers events. In addition,
expert consultants in different countries (senior
advisors) will identify business opportunities in the
target countries, and bring them to the attention of
Swiss businesses.
After an initial funding of about CHF4 million by
the federal government, "Medtech Switzerland" will
be financed increasingly by the private sector.
2.4. ACKNOWLEDGEMENTS.
We would like to thank the authors of this study:
Paul Anderson (Sonnenberg & Anderson, Chicago,
IL), Andreas Baenziger (MedWork AG, Appenzell,
Switzerland), Richard Franklin (Baker & McKenzie,
Chicago, IL), David Kouidri, (Polydec International,
Chicago, IL), John Lemker (The Wood Burditt Group,
Chicago, IL), Erwin Locher (Medtech Switzerland,
Bern, Switzerland), Scot Orgish (Swiss Business Hub
USA, Houston, TX), Patricia Scheller (Medtech
Switzerland, Solebury, PA), Frank Ustar (Swiss
Business Hub USA, Los Angeles, CA), and Daniel
Wuersch (Wuersch & Gering LLP, New York, NY).
We would also like to extend special thanks to Claude
Bernoulli, and Pierre Hiltpold, Neuchtel Chamber
of Industry and Commerce, Henry Christen, Ernst
& Young AG, Andr Haemmerli, Johnson & Johnson,
Le Locle, Richard Fritschi, Ypsomed AG, Thomas
Hafen, Bhlmann Laboratories AG, Jacqueline
Renowden, Swiss Business Hub USA, Chicago, Willi
Meier, Swiss MEM, Melchior Buchs, FASMED, Anita
Soltermann, seco, and Rainer Voelksen, Swissmedic,
who provided valuable support to the study.
12
3. U.S. Medical
Technology Industry
Scot Orgish, Trade Commissioner, Swiss Business Hub USA
3.1. FACTS AND FIGURES.
The U.S. healthcare equipment and supplies market is the largest in the world which, according to Datamonitor,
generated approximately $121.3 billion in sales in 2009. The total healthcare equipment and supplies market
is forecast to increase at an annual growth rate of about 3.9 percent (2009-2014) to a market value of $146.7
billion. Figure 1 shows the estimated market value and growth rate from 2009-2014 as well as the market share
of the various equipment and supply categories.
Figure 1 U.S. Healthcare Equipment & Supplies Market Value Forecast, 2009-2014
Year
$ Billion
Growth (%)
Category
Share (%)
2009
121.3
3.0
Disposable Equipment & Supplies
40.0
2010
127.3
4.9
Other Equipment
19.2
2011
132.4
4.0
Technical Aids
13.5
2012
137.3
3.7
Dental Surgical Equipment & Supplies
11.3
2013
142.1
3.5
IV Diagnostics Equipment
9.4
2014
146.7
3.3
Ophthalmic Equipment
6.6
3.9
Total
100.0
CAGR 2009-2014
Source: Healthcare Equipment & Supplies in the U.S., Datamonitor, April 2010
Figure 2 provides a more narrow view of the market and focuses on medical devices. Standard & Poors
estimates the U.S. medical device market generated $88.8 billion in sales in 2008. Assuming the same
estimated CAGR of 3.9% from 2008-2014 as show above, the U.S. medical device market will grow to
a market value of $111.7 billion in 2014. The Cardiovascular device market is the largest segment with
a market share of 28% followed by the Orthopedics device segment with 19%. These two segments are
discussed in more detail in subsequent chapters in this report.
Figure 2 The U.S. Medical Device Market by Specialty Area in 2008 ($88.8 Billion)
17% Other
5%
Hearing &
Audiology
7%
Wound Care
Cardiovascular 28%
Orthopedics
19%
12% Ophthalmic
Equipment
12% General Surgery
Source: S&P Industry Survey Healthcare: Products & Supplies, February 4, 2010
U.S. Census Bureau data show there are approximately 5,324 companies that manufacture medical
technology products in the U.S. Over 72% are small companies with less than 20 employees. (These data
refer to companies categorized under specific North American Industrial Classification System (NAICS)
codes for the medical device industry and exclude large companies classified under other primary industries
that also have medical device divisions).
13
Figure 3 Number of U.S. Medical Technology Companies by Number of Employees

5000
4000
3885
3000
2000
1323
799
1000
0
<20
20-99
100+
Source: U.S. Census Bureau, 2007 Economic Census
Figure 4 uses the same NAICS codes as Figure 3 but shows the distribution of companies by the types of
products produced.
Figure 4 Distribution of U.S. Medical Technology Manufacturers by NAICS Code
10% Electromedical
Ophthalmic 10%
14% Dental
In vitro
Diagnostics
4%
Irradiation
3%
22% Surgical &

Medical
Instruments
Surgical
Appliances &
Supplies 37%
The category, surgical appliances and supplies, includes orthopedic devices, prosthetic appliances, surgical
dressings, crutches, surgical sutures, hospital beds, and operating room tables. The category, surgical and
medical instruments, includes surgical, ophthalmic, and veterinary instruments and apparatus (except
electrotherapeutic, electromedical and irradiation apparatus). Examples of products include syringes,
hypodermic needles, anesthesia apparatus, blood transfusion equipment, catheters, surgical clamps and
medical thermometers. Electrotherapeutic and electromedical devices include magnetic resonance
imaging equipment, medical ultrasound equipment, pacemakers, hearing aids, electrocardiographs, and
electromedical endoscopic equipment. Irradiation equipment includes X-ray, beta-ray, gamma-ray and
other ionizing radiation equipment including generators, tubes and lamps; CT/CAT scanners and nuclear
irradiation apparatus.
Figure 5 shows the total value of products shipped in 2007 by the respective medical product NAICS groups.
Figure 5 Total Value of U.S. Medical Product Shipments by NAICS Code ($ Billions)
$31.5 Surgical
Appliances &
Supplies
$4.4 Dental
Surgical &
Medical
Instruments $29.6
Electromedical $22.5
$5.7 Ophthalmic
$10.8 Irradiation
$13.0 InVitro
Diagnostics
14
3.2. U.S. PRODUCTION & CONSUMPTION OF MEDICAL DEVICES

& DIAGNOSTIC PRODUCTS
Figure 6 U.S. Production and Consumption of Medical Devices in 2008
Medical Devices
Production $ Billions
Consumption $ Billions
Net Surplus $ Billions
93.54
88.52
5.02
Source: USA Medical Device Market Intelligence Report- Espicom Healthcare Intelligence, January 31, 2010
In 2008, the U.S. produced more medical devices domestically than it consumed resulting in a net surplus
of about $5 billion. Figure 6 shows total U.S. production and consumption of medical devices in 2008.
Likewise, the U.S. exported about $5 billion more medical products than it imported. Nevertheless, Figure
7 shows, at a value of $30.46 billion in 2008, the U.S. imported a substantial amount of medical products
from abroad. It should also be pointed out that some of the products destined for U.S. markets are also
made abroad by U.S. owned companies.10
Figure 7 U.S. Exports and Imports of Medical Products in 2008
U.S. Exports
$35.48 billion
U.S. Imports
$30.46 billion
Net Trade Balance
$5.02 billion
Source: USA Medical Device Market Intelligence Report- Espicom Healthcare Intelligence, January 31, 2010
3.3. R&D SPENDING BY MEDICAL

TECHNOLOGY COMPANIES.
R&D spending by medical technology companies
in the U.S. averaged about 8.8% in 2009. The
amount of R&D spending as a percentage of sales
by individual companies sampled ranged from
a low of 3.3% to a high of 20.1%. Orthopedic
device manufacturers investment in R&D was on
the lower end of the scale averaging about 5.5%
whereas the cardiovascular and in-vitro diagnostics
manufacturers averaged about 11.4%
3.4. M&A, VENTURE CAPITAL, AND
IPO ACTIVITY IN THE MEDICAL
TECHNOLOGY INDUSTRY.
According to GlobalData, total investment in the
worldwide medical device industry exceeded $73
billion in 2009. Merger & acquisitions (M&A)
activity totaled $18.7 billion and is included in the
overall investment amount.
Mergers & Acquisitions
Merger and acquisition (M&A) activity for all
segments of the medical device industry slowed
significantly from the 4th quarter of 2008 through
the 3rd quarter of 2009 to its lowest level in five
years by almost any measure (i.e. number of
deals, total volume of deals, average return for
investors, number of billion-dollar plus deals, etc.)
GlobalData reports the total number of M&A deals
dropped to 278 in 2009 from 304 in 2008. The
slowdown was largely driven by tight credit markets
and a worldwide economic recession during this
time period. With the exception of a small number
of companies, most medical technology companies
found the deal market difficult as public and private
investors became nervous and corporate acquirers
took a wait and see position to assess how the
market would develop. Many strategic acquirers

that were previously active, both U.S. and foreign,
went into survival mode and conserved cash, cut
costs and postponed acquisitions. In addition, a
lack of available bank financing prevented private
equity firms from acquiring medical technology
companies. Following this one year period of
downturn, M&A activity in the medical technology
sector increased by 154% in the 3rd quarter of
2009 to $5.6 billion, and the outlook for 2010 is
strong. Some leading deals from the 3rd and 4th
quarters of 2009 include:
Danahers acquisition of AB Sciex/Analytical
Technologies/Molecular Devices Corp.
for $1.1 billion (3rd quarter 2009)
Thermo Fishers acquisition of B.R.A.H.M.S. for
$470 million (3rd quarter 2009)
Abbott Laboratories acquisition of Evalve for $410
million (3rd quarter 2009)
Nipro Corps. acquisition of Home Diagnostics for
$190 million (3rd quarter 2009)
Quidel Corps. acquisition of Diagnostic HYBRIDS
for $130 million (3rd quarter 2009)
J&Js acquisition of Acclarent for $785 million (4th
quarter 2009)
Stryker Corps. acquisition of Ascent Healthcare
Solutions for $525 million (4th quarter 2009)
Biomets acquisition of Cartilix, Inc. (amount not
disclosed) (4th quarter 2009)
15
Becton Dickinsons acquisition of HandyLab, Inc.

(amount not disclosed) (4th quarter 2009)
Ernst & Young (E&Y) reported that during the first
half of 2010, in the U.S. and Europe, there were 89
M&A deals in the medical technology sector which
had a value of $16.9 billion. Comparatively, for the
full year in 2009, in the U.S. and Europe, there were
172 deals worth $15.7 billion. (The first half 2010
total does not include Novartis $28.3 acquisition
of Alcon from Nestle.) E&Y expects the number of
M&A deals in the second half of 2010 will remain
brisk and that the total value of deals may reach
$30 billion by the end of 2010. 11
Leading deals from 2010 and 2011 include:
Medtronics acquisition of Invatec for $350+
million (1st quarter 2010)
Roches acquisition of Medingo Ltd. for $160+
million (2nd quarter 2010)
St. Jude Medicals acquisition of LightLab Imaging
for $90 million (2nd quarter 2010)
Merck KGaAs acquisition of Millipore, Inc. for
$6.8 billion (3rd quarter 2010)
J&Js acquisition of Micrus Endov
ascular Corp. for $480 million (3rd quarter 2010)
Hologics acquisition of Sentinelle Medical for $85
Roches acquisition of BioImagene, Inc. for $100
Stryker Corp.s acquisition of Gaymar Industries
for $150 million (3rd quarter 2010)
Medtronics acquisition of ATS Medical for $370
Boston Scientifics acquisition of Asthmatx for
$193.5+ million (4th quarter 2010)
St. Jude Medicals acquisition of AGA Medical
Holdings for $1.03 billion (4th quarter 2010)
GEs acquisition of Clarient, Inc. for $580 million
(4th quarter 2010)
Medtronics acquisition of Osteotech for $123
million (4th quarter 2010)
Medtronics acquisition of Ardian, Inc. for $800
million (announced 4th quarter 2010, closed 13
January 2011)
Boston Scientifics acquisition of Sadra Medical for
$225+ million (4th quarter 2010)
Stryker Corp.s acquisition of Boston Scientifics

neurovascular unit for $1.5 billion (announced 4th
quarter 2010, closed 3 January 2011)
Danaher Corp. pending acquisition of medical-test
maker Beckman Coulter Inc. for $5.87 billion (1st
quarter 2011)
Recent M&A activity by leading companies
indicates that both medical device manufacturers
and pharmaceutical companies are motivated
to acquire niche technologies to strengthen their
product portfolios, diversify, and/or supplement
their in-house R&D activities. Several examples
include recent acquisitions by Medtronic, St
Jude Medical and Boston Scientific in the
electrophysiology segment to strengthen their
atrial fibrillation product portfolios. (e.g., Boston
Scientific acquired CryoCor for $17.6 million;
Medtronic acquired Ablation Frontiers for $225
million and CryoCath for $13.3 million, and St.
Jude Medical acquired EP Med Systems for $92.1
million). Some examples of device companies that
were acquired by major pharmaceutical companies
include Abbott Laboratories acquisition of
Advanced Medical Optics for $2.8 billion, Johnson
& Johnsons acquisition of Mentor Corp. for $1.1
billion, BTG Pharmaceuticals Groups acquisition
of Biocompatibles for $250 million, and Novartis
proposed acquisition of Alcon for $28.1 billion.
According to Ernst & Young, trends in the medical
technology M&A area indicate: (1) the average deal
value has been about $365.5 million over the past
5 years; (2) investment has shifted away from early
stage companies; and (3) the primary interest is in
acquiring mid-tier companies that have attractive
valuations.
Venture Capital
In looking at the area of venture capital, even
though overall venture capital funding was
substantially down in 2009, funding in the medical
technology sector remained strong. From the 4th
quarter of 2008 to the 4th quarter of 2009, venture
capital funding into medical technology companies
totaled $719 million in new capital invested into
87 deals. This represents an increase of 13% in
dollars and 18% in the number of deals. Overall,
investments in biotechnology and medical device
companies accounted for 34% of all venture capital
dollars invested in 2009.12 In addition, during the
first nine months of 2009, a total of $2.6 billion
went into 292 medical device and equipment deals.
The majority of the transactions were mid-to-late
stage transactions and the average investment was
about $8.9 million.13 Also, venture capital financing
for medical technology surpassed venture capital
financing for Information Technology (IT) in 2009
for the first time in more than 10 years. Continuing
with this trend, venture capital investment in
medical technology totaled $2.72 billion in the
second quarter of 2010 and continued to exceed
venture capital investment in IT.14
16
Initial Public Offerings

Initial Public Offerings (IPOs) have not proven
to be a good means of raising capital, or a viable
exit strategy for medical device and diagnostics
companies for the last couple of years. During
the time period between January 2008 and April
2010, only six medical device companies filed
IPOs while 17 firms withdrew their IPOs.15 In
2009, AGA Medical Holdings, a manufacturer of
medical devices to treat heart defects and vascular
diseases, was the only medical device company to

go public that year. The company was expecting
its IPO starting price would be between $19 and
$21, but ultimately the price opened at $14.50.
(The 52-week low in 2010 was $11.61 and the high
was $18.95). This example indicates that the IPO
option for raising capital, or as an exit strategy for
medical device companies, may continue to be
difficult in the near term. Nevertheless, AGA was
ultimately acquired by St. Jude Medical at the end
of 2010 for an agreed upon share price of $20.80.
4. U.S. Healthcare Industry

4.1. FACTS AND FIGURES.
The U.S. healthcare industry is enormous by any
measure and continues to grow as the demand for
more medical devices and treatments increases.
Both the number of persons employed in the
industry and the number of facilities are increasing
every year. The 2007 U.S. Economic Census shows
the number of persons employed in the healthcare
industry is just over 14.33 million which is about
12.7 percent of all employed civilians. Within
this amount, physicians offices and clinics employ
2.11 million, dental offices and clinics employ
826 thousand, chiropractic offices and clinics
121 thousand, hospitals 5.54 million, nursing
and residential care facilities 3.05 million, and
ambulatory healthcare service sites 5.73 million.
In looking at the various types of healthcare service
facilities, there are 547,709 ambulatory healthcare
service facilities, 6,529 hospitals, and 75,730 nursing
and residential care facilities in the U.S. The census
data also show the healthcare industry generated
revenue of $1.552 trillion. From that amount,
hospitals generated $707.0 billion, ambulatory
healthcare services generated $672.4 billion and
nursing and residential care facilities generated
$167.9 billion.16
Changing demographics will be a driving force in

the market as an aging population will significantly
contribute to rising healthcare costs, and increasing
demand for medical products and services. In 2007,
the average healthcare spending for persons age
25-44 was $2,360, however, the average amount of
spending more than doubled to $5,474 for persons
age 45-64, and almost quadrupled to $9,357 for
persons age 65 and over.17 It is estimated that every
eight seconds another person turns 50, and this
trend will continue over the next 10 years. This
being the case, real per capita spending could
increase by 24 percent over current levels by the
year 2030.18
The 65+ age group includes just over 40 million
persons in 2010. As shown in Figure 8, that
number is projected to reach almost 55 million by
2020. In addition, the life expectancy of persons
aged 65 is expected to increase by up to 25 percent
by 2075. These demographic trends will ultimately
increase demand for medical products, especially
in the areas of cardiology, orthopedics, urology,
neurology, diagnostics and imaging.
Figure 8: On the left side, Population aged 65 and above on the right side, Life Expectancy
Year
Million
Year
At Birth
At Age 65
At Age 75
1990
31.1
1990
75.4
+17.2
+10.9
2000
35.1
2000
77.0
+18.0
+11.4
2010
40.2
2001
77.2
+18.1
+11.5
2020
54.6
2002
77.3
+18.2
+11.5
2030
71.5
2003
77.5
+18.4
+11.8
2040
80.0
2004
77.8
+18.7
+11.9
2050
86.7
2005
77.8
+18.7
+12.0
Source US Census Bureau, Population Statistics and National Center for Health Statistics
17
Figure 9 Projected Life Expectancy at Birth 2005 2075

2005
2025
2050
2075
Male
74.8
77.0
79.4
81.3
Female
79.6
81.2
83.2
84.9
Source: CRS Report for Congress: Life Expectancy in the United States, August 16, 2006
4.2. THE NATIONS HEALTH DOLLAR.

The U.S. healthcare industry already accounts
for an increasingly large share of the nations
gross domestic product (GDP), and it is expected
to become an even larger portion over the next
decade. In 2009, U.S. health expenditures totaled
about $2.49 trillion, or a record 17.6% of the
U.S. economy, an increase of 4.0 percent over the
previous year. According to federal government
reports, this represents the smallest percentage
increase in 50 years that healthcare spending has
been tracked. It is hypothesized that the decline
is due to the economic downturn that has caused
many people to cut out-of-pocket spending and
hospitals to curtail expansion plans. Despite the
slowdown in growth, health spending consumed a
greater share of the economy up one percentage
point over 2008 due to the 1.7 percent decline in
the gross domestic product. On a per capita basis,
health expenditures in 2009 averaged $8,086 per
person, up $405 from 2008.19 Figure 10 gives a
pictorial overview of where the health expenditure
money came from and where it went. The Office
of the Actuary at CMS projects that by 2018
national healthcare expenditures will increase to
$4.35 trillion and comprise 20.3 percent of GDP.
This represents an average annual growth rate of
6.4 percent over the next 10 years.
Where it came from:

Private payers comprised more than half of
national health expenditures in 2009. Private health
insurance totaled $801.2 billion, and made up the
largest share (32 percent) within the private payers
group, while out-of-pocket payments totaled $299.3
billion, and comprised 12 percent of expenditures.
The public sector comprised the remaining
49 percent of health payments in the U.S.
The public sector is made up of two primary
components: Medicare and Medicaid. Medicare
is the national health insurance program which
provides coverage to approximately 46.3 million
beneficiaries. Covered individuals include people
age 65 or older, as well as some people under age
65 with disabilities, and people with End-Stage
Renal Disease. Medicaid is a program that pays
for medical assistance for certain individuals and
families with low incomes and limited resources
who meet certain eligibility requirements. Medicare
spending totaled $502.3 billion (20 percent)
while federal, state, and local spending for Public
Assistance (of which Medicaid is the major
component) totaled $373.9 billion (15 percent).
A third component of the public sector, Other
Public, includes government health spending for
veterans, military personnel, injured workers and
school children, and for general public health
activities. This component makes up the remaining
14 percent of health spending by the public sector.
Figure 10 The Nations Health Dollar in 2009:

The chart below shows where it came from - the chart on the following page shows where it went.
Where it Came From
15% Medicaid
20% Medicare
12% Out of
Pocket
Other Public 14%

Other Private
7%
Private
Insurance 32%
Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.
18
Where it Went
20% Physician &
Clinical Services
Nursing Home
Care
31% Hospital Care
6%
Prescription
Drugs 10%
13% Other
Program Admin
& Net Cost
7%
Investment
6%
Dental Services
& Other
Professionals
7%
Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.
Where it went:
In looking at where the money went, Hospital
Care consumed the largest share of expenditures
accounting for 31 percent of the healthcare dollar,
and amounting to $759.1 billion in 2009. Physician
and Clinical Services consumed 20 percent of
the expenditures and totaled $505.9 billion.
Prescription Drugs accounted for about 10 percent
or $249.9 billion. Program and Administration
Costs accounted for about 7 percent of total
expenditures and Nursing Home Costs followed at
6 percent. The remaining 26 percent of healthcare
expenditures is made up of spending that went to

dental services, other professional services, home
healthcare, durable medical products, over-thecounter medicines and sundries, public health,
research and construction.
At a value of about $2.5 trillion in 2009, the U.S.
healthcare industry accounts for about 38 percent
share of the estimated $6 trillion global healthcare
industry. Figure 11 details national health
expenditures by type of product or service from
2004 through 2008. As a whole, national health
expenditures experienced a compound annual
growth rate of 5.3 percent for the 4-year period.
Figure 11 National Health Expenditures ($ Billions + 4-year compound annual growth rate)
Type of Expenditure
2005
2006
2007
2008
2009
Growth
(CAGR
%)
A)
Health Consumption Expenditures
1,890.3
2,016.9
2,135.1
2,234.1
2,330.1
5.4
1)
Personal Health Care
1,692.6
1,798.8
1,904.3
1,997.2
2,089.9
5.4
a)
Hospital Care
606.5
648.3
686.8
722.1
759.1
5.8
b)
Professional Services
559.4
588.4
619.4
652.2
674.9
4.8
i)
Physician & Clinical Services
419.6
441.6
462.6
486.5
505.9
4.8
ii)
Dental Services
86.8
91.4
97.3
102.3
102.2
4.2
iii)
Other Professional Services
53.1
55.4
59.5
63.4
66.8
5.9
c)
Other Health, Residential &

Personal Care
96.5
102.1
108.3
113.3
122.6
6.2
d)
Home Health Care
48.7
52.6
57.8
62.1
68.3
8.8
e)
Nursing Care Facilities
112.1
117.0
126.5
132.8
137.0
5.1
f)
Retail Sales of Medical Products
269.3
290.4
305.6
314.7
328.0
5.1
i)
Prescription Drugs
201.7
219.8
230.2
237.2
249.9
5.5
ii)
Durable Medical Equipment
30.4
31.9
34.4
35.1
34.9
3.5
iii)
Non-Durable Medical Products
37.2
38.7
41.1
42.3
43.3
3.9
2)
Govt Administration
26.8
28.3
29.2
29.2
29.8
2.7
3)
Net Cost of Health Insurance
114.7
127.2
132.8
134.8
133.2
3.8
4)
Govt Public Health Activities
56.2
62.6
68.8
72.9
77.2
8.3
B)
Investment
130.7
135.2
148.4
157.2
156.2
4.6
1)
Research
40.3
41.4
41.9
43.2
45.3
3.0
2)
Structures & Equipment
90.4
93.8
106.4
114.0
111.0
5.3
2,021.0
2,152.1
2,283.5
2,391.4
2,486.3
5.3
Total
Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. January 2011
19
Spending for hospital care increased 5.1 percent to

$759.1 billion in 2009 and accounted for about 31
percent of total healthcare expenditures. Growth
in 2008 and 2009 was much slower than the trend
between 1999 and 2007, when spending increased
an average of 7.2 percent per year. The slower
growth in 2009 was influenced by decelerating
private health insurance spending and slower
price growth. Partially offsetting these factors was
an increase in Medicaid spending as Medicaid
enrollment increased considerably in 2009.
Spending growth for physician and clinical services
($505.9 billion) grew 4.0 percent in 2009, a decline
from 5.2 percent in 2008. Slower growth in the use
and intensity of services in 2009 was partially offset
by increasing prices.
Spending for prescription drugs rose to $249.9
billion, an increase of 5.3 percent in 2009 after a
3.1 percent growth in 2008, driven by faster growth
in both prices and utilization.
Expenditures for free-standing home healthcare services
accelerated in 2009 increasing 10.0 percent to $68.3
billion in 2009 following growth of 7.5% in 2008.
Spending on dental services declined 0.1 percent

in 2009 to $102.2 billion in 2009. Out-of-pocket
spending for dental services (which accounts for
over 40 percent of dental spending) declined 5.5
percent in 2009.20
In 2009, U.S. Personal Healthcare Expenditures
totaled $2.09 trillion. From this amount, $759.1
billion (36.3 percent) went to Hospital Care and
$505.9 billion (24.2 percent) went to Physician
and Clinical Services. The source of funds broke
down as follows: Private Health Insurance and
Out-of-Pocket spending accounted for $1,011.5
billion (48.4 percent) and Medicare and Medicaid
accounted for $471.3 billion (22.6 percent) and
$345.7 billion (16.5 percent), respectively, of the
Personal Healthcare Expenditures in 2009. The
remaining $261.5 billion (12.5 percent) includes
other public and private health insurance programs
and third party payers not broken out separately.21
(See Figure 14 and Figure 15)
Figure 12 and Figure 13 form a two part table
which details the amount of expenditures for all
types of personal healthcare expenditures in 2009.
Figure 12 Personal Healthcare Expenditures, by Type of Expenditure and Source of Funds, 2009 ($ Billions), Part 1

Total
Hospital
Care
Physician
& Clinical
Services
Dental
Services
Other
Professional
Services
Home
Health
Care
A)
Out-of-pocket
Payments
299.3
24.4
47.9
42.5
17.7
6.0
B)
Health Insurance
1,767.4
669.3
407.3
59.3
43.1
59.7
1)
Private Health
Insurance
801.2
265.9
237.7
50.0
24.7
5.0
2)
Medicare
502.3
220.4
109.4
0.3
13.7
29.8
3)
Medicaid
373.9
136.1
39.9
7.1
4.5
24.3
4)
CHIP
11.1
3.1
2.9
0.8
0.2
0.0
5)
Dept. of Defense
36.5
15.2
11.9
1.0
--
--
6)
Dept. of Veterans
Affairs
42.4
28.6
102.7
0.0
--
0.6
C)
Other Third Party

Payers
186.1
65.3
50.6
0.5
6.0
2.5
D)
Public Health Activities
77.2
--
--
--
--
--
2,330.0
734.6
505.8
102.2
66.8
68.2v
Total
20
Figure 13 Personal Healthcare Expenditures, by Type of Expenditure and Source of Funds, 2009 ($ Billions), Part 2
Total
Prescription
Drugs
Other NonDurable
Medical
Products
Durable
Medical
Equip.
Nursing
Home Care
Other
Personal
Health Care
A)
Out-of-pocket
Payments
299.3
53.0
40.4
18.6
39.8
8.9
B)
Health Insurance
1,767.4
193.3
2.8
15.8
87.5
76.8
1)
Private Health
Insurance
801.2
108.6
--
4.0
10.5
5.8
2)
Medicare
502.3
54.8
2.8
7.6
28.0
4.6
3)
Medicaid
373.9
20.0
--
4.3
45.0
64.4
4)
CHIP
11.1
1.5
--
0.0
0.0
0.9
5)
Dept. of Defense
36.5
6.0
--
--
--
--
6)
Dept. of Veterans
Affairs
42.4
2.5
--
--
4.0
1.0
C)
Other Third Party

Payers
186.1
10.0
--
0.5
10.0
36.9
D)
Public Health
Activities
77.2
--
--
--
--
--
Total
2,330.0
256.4
43.2
35.0
127.3
122.5
Figure 14 and Figure 15 itemize the type of product or service provided and how it was paid. In 2009,
National Health Consumption Expenditures totaled $2.330 trillion. From this amount we see that
Medicare and Medicaid (Part 1) accounted for $876.2 billion (37.6%) of the total while Private Funds (Part
2) accounted for $1,100.5 trillion (47.2%). Breaking the Private portion down further, we see that $299.3
billion was paid by consumers through out-of-pocket payments while Private Health Insurance companies
paid $801.2 billion. In the area of Durable Medical Products, total private expenditures were $22.6 billion.
However, from that amount, $18.6 billion (82.3%) was paid out-of-pocket by consumers while private
health insurance paid only $4.0 billion (17.7%). In the area of Non-Durable medical products, on the
private side, the full amount of $40.5 billion was paid by the consumer.
Figure 14 National Health Expenditures, by Source of Funds & Type of Expenditure, 2009 ($ Billions), Public (Part 1)
Public
Total
Total
Medicare
Medicaid
A)
Health Consumption Expend.
2,330.0
876.2
502.3
373.9
1)
2,089.9
817.0
471.3
345.7
a)
Hospital Care
759.1
356.5
220.4
136.1
b)
674.9
175.0
123.4
51.6
i)
505.9
149.3
109.4
39.9
ii)
Dental Services
102.2
7.4
0.3
7.1
iii)
66.8
18.2
13.7
4.5
c)
Other Health, Residential, & Personal Care
122.6
69.0
4.6
64.4
d)
Home Health Care
68.3
54.1
29.8
24.3
e)
137.0
73.0
28.0
45.0
f)
328.0
89.4
65.1
24.3
i)
Prescription Drugs
249.9
74.8
54.8
20.0
ii)
34.9
11.7
7.4
4.3
iii)
Non-durable Medical Products
43.3
2.8
2.8
--
2)
Govt Administration
29.8
25.2
7.0
18.2
21
3)
133.2
34.2
24.1
10.1
4)
77.2
--
--
--
B)
Investment
156.2
--
--
--
1)
Research
45.3
--
--
--
2)
110.9
--
--
--
2,486.3
876.2
502.3
373.9
Total
Figure 15 National Health Expenditures, by Source of Funds & Type of Expenditure, 2009 ($ Billions), Private (Part 2)

Private
Total
Total
Consumer
Other Public
& Private
Insurance, 3rd
Party Payers, &
Public Health
Activity (not
included in
Total Private
Amount)
Out-of-pocket
Private
Insurance
A)
Health Consumption Expend.
2,330.0
1,100.5
299.3
801.2
353.3
1)
2,089.9
1,011.5
299.3
712.2
261.5
a)
Hospital Care
759.1
290.3
24.4
265.9
112.3
b)
674.9
420.6
108.2
312.4
79.3
i)
505.9
285.6
47.9
237.7
70.9
ii)
Dental Services
102.2
92.5
42.5
50.0
2.4
iii)
66.8
42.4
17.7
24.7
6.2
c)
Other Health, Residential, & Personal

Care
122.6
14.7
8.9
5.8
38.9
d)
Home Health Care
68.3
11.0
6.0
5.0
3.1
e)
137.0
50.3
39.8
10.5
13.7
f)
328.0
224.5
112.0
112.5
14.1
i)
Prescription Drugs
249.9
161.6
53.0
108.6
13.6
ii)
34.9
22.6
18.6
4.0
0.6
iii)
Non-durable Medical Products
43.3
40.5
40.5
--
0.0
2)
Govt Administration
29.8
--
--
--
4.7
3)
133.2
89.0
--
89.0
10.0
4)
77.2
--
--
--
--
B)
Investment
156.2
--
--
--
--
1)
Research
45.3
--
--
--
--
2)
110.9
--
--
--
--
2,486.3
1,100.5
299.3
801.2
353.3
Total
22
5. Cardiovascular
Patricia Scheller, Senior Advisor, Medtech Switzerland and
5.1.
FACTS AND FIGURES
Coronary heart disease and stroke are the two most
significant areas of cardiovascular disease, and are
the first and third leading causes of death in the
U.S. (Cancer is the second leading cause). Heart
disease and stroke combined accounted for about
one-fourth of all U.S. deaths in 2007. An estimated
813,804 Americans (33.6% of all deaths) died from
all cardiovascular diseases combined in 2007 while
about 82.6 million Americans (more than one-third
of the population) live with the disease. (From that
amount, approximately 40.4 million [49.8%] are
age 60 and older). During 2007, about 6.8 million
inpatient cardiovascular operations and procedures
were performed in the U.S. Cardiovascular disease
includes both acute conditions such as myocardial
infarction (heart attack), and chronic conditions

such as congestive heart failure, atherosclerosis, and
hypertension. Although cardiovascular disease may
be diagnosed at any age, it occurs most frequently
later in life, especially among inactive persons who
are also overweight or obese. This being the case,
the aging Baby Boom generation in the U.S., which
has grown up on and maintained a diet of fast-food,
is expected to show a significant increase in the
incidence of heart disease over the next ten years.
As a result, the economic impact of cardiovascular
disease on the U.S. healthcare system is expected
to increase as the population ages. In 2007, the
direct economic impact of cardiovascular disease
is estimated to be $167.4 billion for healthcare
expenditures.22
Figure 16 Prevalence of Cardiovascular Disease, U.S. 2007

Type
Millions of Persons
Cardiovascular Disease
82.6
High Blood Pressure
76.4
Coronary Heart Disease
16.3
-Myocardial Infarction
7.9
-Angina Pectoris
9.0
Congestive Heart Failure
5.7
Stroke
7.0
Congenital CV Defects
0.65 - 1.3
Source: American Heart Association. Heart Disease and Stroke Statistics 2011 Update
Coronary heart disease is the leading contributing or underlying cause of death among all types of
cardiovascular disease in the U.S. accounting for 406,351 deaths, or one of every six deaths in 2007. Stroke
is the second major cause of death among all types of cardiovascular disease in the U.S. accounting for
135,952 deaths in 2007. Interestingly, from 1997-2007 death rates from coronary heart disease decreased
26.3% and the actual number of deaths decreased 12.9%. For strokes, the death rate declined by 39.3%
and the actual number of deaths fell 18.8%. Figure 17 gives a pictorial overview of the percentage of
deaths resulting from the various types of cardiovascular disease.
Figure 17 Percentage of Deaths from Cardiovascular Diseases, U.S. 2007 (100% = 813,804)
4%
Disease of
the Arteries
7%
High Blood
Pressure
7%
Heart Failure
Other 14%
Coronary
Heart Disease 51%
17% Stroke
23
There are four health-related behaviors that

significantly increase the probability of being
afflicted by cardiovascular disease. These include:
population, the market for cardiovascular medical

devices and treatments is expected to experience
significant growth over the next decade.
The use of tobacco: Persons who smoke are

2-4 times as likely to have a stroke or heart attack
compared with nonsmokers. Each year about
152,000 deaths from cardiovascular disease are
smoking related.
During the time period from 1997 to 2007, the

number of inpatient cardiovascular operations
and procedures increased 27 percent. In 2007,
an estimated 6,846,000 inpatient cardiovascular
operations and procedures were performed in
the U.S. (Note: These data do not reflect any
procedures performed on an outpatient basis.)
Lack of physical activity: People who are

physically inactive or sedentary have 1.5 to 2.4
times the risk for heart disease compared with those
who are active. Fifty-six percent of adults who
responded to a 2009 National Health Interview
Survey reported engaging in no vigorous activity
(activity that causes heavy sweating and a large
increase in breathing or heart rate), The proportion
of respondents who did not participate in any
vigorous activity increased with age from 45.7% in
18-to 44-year-olds to 86.8% in adults greater than
75 years of age.
Obesity: People who are overweight have an
increased risk for cardiovascular disease. Overall,
68% of U.S. adults were overweight or obese (72%
of men and 64% of women) in 2007. The obesity
epidemic in children continues to grow. Compared
with 1973 to 1974, the proportion of children 5 to
17 years of age who were obese was 5 times higher
in 2008 to 2009.
Poor Nutrition: Dietary habits affect
multiple cardiovascular risk factors including
both established risk factors (i.e. blood pressure,
cholesterol levels, glucose levels, and obesity/weight
gain) and novel risk factors (i.e. inflammation,
cardiac arrhythmias, endothelial cell function,
triglyceride levels, lipoprotein(a) levels, and heart
rate.
Based on the percentage of the population
with these risk factors combined with an aging
Figure 18 shows the number of inpatient

cardiovascular procedures in 2007 and the mean
cost of each procedure in the U.S. Diagnostic
Cardiac Catheterization was the most common
type of procedure with approximately 1.06 million
performed in 2007 at a mean cost of $34,198
per procedure. In 2007 an estimated 622,000
patients underwent Percutaneous Coronary
Intervention (PCI), which includes procedures
such as percutaneous transluminal coronary
angioplasty (PTCA) and stenting. PCI was the
second most common procedure with 618,000
performed at a mean cost of $56,015. Over 90%
of all PCI procedures involve the placement of
a stent. Approximately 67% of PCI procedures
were performed on men, and approximately 51%
were performed on people over 65 years of age.
There were approximately 232 000 patients who
underwent a total of 408,000 coronary artery
bypasses in 2007. A total of 163,149 procedures
involved CABG in 2009, demonstrating the
continued decline in the procedure since the mid1990s. Coronary Artery Bypass Surgery is more
than twice as expensive as Percutaneous Coronary
Intervention (PCI) at a mean cost of $117,094 per
procedure thus making the minimally invasive PCI
procedure the more desirable option whenever
possible. In 2006, it was estimated that 76% of
PCI procedures were performed using drug-eluting
stents and 24% using bare-metal stents.
Figure 18 Inpatient Cardiovascular Procedures 2007, Mean Cost 2008

Procedure
No. of Procedures
Mean Cost
Cardiac Catheterization
1,059,000
$34,198
Percutaneous Coronary Intervention

(PCI)
618,000
$56,015
PCI with Stents
560,000
n/a
Coronary Artery Bypass Surgery

(Patients)
408,000
(232,000)
$117,094
Pacemakers
358,000
$57,633
ImplantableDefibrillators
111,000
$124,901
Valves
106,000
$164,238
Endarterectomy
91,000
$30,588
Heart Transplants (performed in 2009)
2,211
n/a
Note: These data do not reflect any procedures performed on an outpatient basis. Many more procedures are being performed on an outpatient basis.
24
In 2007, the total direct cost of cardiovascular

disease and stroke is estimated at $167.4 billion.
This amount includes expenditures for physicians
and other professionals, hospital services,
prescribed medications, and home health care.
(For comparison, in 2010 the estimated direct cost
of treating all cancers was cited at $103 billion.)23
Direct U.S. expenditures for the treatment of
patients with coronary heart disease is estimated at
$82.2 billion of which hospital costs make up about

82.0 percent of the costs. Stroke is the second
leading cause of death among cardiovascular
diseases with an incidence of approximately 30
percent of coronary heart disease (i.e., coronary
heart disease 51%, stroke, 17%), and direct
expenditures for stroke account for just under onethird of the direct costs for coronary heart disease.
(i.e. $25.2 billion vs. $82.2 billion).
Figure 19 shows the estimated direct costs of cardiovascular disease and stroke in the U.S. in 2007. (US$ Billion)
Direct Costs
Heart
Disease*
Stroke
Hypertensive
Disease
Other
Circulatory
Conditions
Total
Cardiovascular
Disease
Hospital inpatient stays
49.8
17.9
6.2
11.8
85.7
Hospital emergency room visits
3.9
0.6
0.6
0.2
5.3
Hospital outpatient or officebased provider visits
13.7
2.5
9.8
5.0
31.0
Home healthcare
6.3
2.9
3.6
1.1
13.9
Prescribed medicines
8.5
1.3
20.4
1.2
31.4
Total Expenditures
82.2
25.2
40.6
19.3
167.4
* This category includes coronary heart disease, congestive heart failure, part of hypertensive disease, cardiac dysrhythmias, rheumatic heart disease,
cardiomyopathy, pulmonary heart disease, and other ill-defined heart diseases.
Costs due to hypertensive disease are limited to hypertension without heart disease.
Cardiovascular Devices Market

According to GlobalData, the U.S Cardiovascular
Devices market was valued at $16.25 billion in
2010 and is forecast to grow at a compound annual
growth rate (CAGR) of 3.2 percent reaching a total
market value of $18.46 billion in 2014. During
the period 2005-2006 growth slowed considerably
in the cardiovascular devices market due to major
product recalls and safety concerns and still remains
relatively subdued because of the recent economic
downturn. However, as pointed out earlier, the
aging U.S. population combined with the number
of persons with risk factors for heart disease should
continue to fuel the growth in the cardiovascular
devices market over the next decade.
GlobalData divides the cardiovascular market into
ten primary segments. The three largest segments
are (1) Cardiac rhythm management, which
consists of pacemakers, implantable cardioverter
defibrillators (ICDs), and cardiac resynchronization
therapy; (2) Interventional cardiology devices, which
consists of PTCA balloons, coronary stents, cardiac
catheters, coronary guidewires, arteriotomy closure
devices, and intravascular ultrasound systems
(IVUS); and (3) Peripheral vascular devices, which
includes peripheral vascular stents, PTA balloons,
aortic stent grafts, synthetic surgical grafts, embolic
protection devices, inferior vena cava filters, and
peripheral guidewires.
In 2010, the Cardiac Rhythm Management
(CRM) segment was valued at $6.4 billion and is
projected to experience relatively little growth, with
a CAGR of 1.0 percent leading to a market value

of $6.7 billion in 2014. Within this segment, the
largest sub-segment is Implantable Cardioverter
Defibrillators (ICDs), which are forecast to grow
by 2.8 percent from $2.6 billion in 2010 to over
$2.9 billion in 2014, which represents a market
value increase of $311 million. The second largest
sub-segment, Pacemakers, is expected to decrease
in value from $2.3 billion in 2010 to about $1.9
billion in 2014. This declining market trend is
projected to continue beyond the forecast period.
Cardiac Resynchronization Therapy (CRT) is the
fastest growing sub-segment of CRM: projected to
increase 4.2 percent per year from $1.5 billion in
2010 to $1.79 billion in 2014.
The Interventional cardiology segment was valued
at $4.1 billion in 2010, and with a CAGR of 3.3
percent, it is projected to grow to a market value
of over $4.6 billion in 2014. Within this segment,
the largest sub-segment is coronary stents, which is
growing at a rate of only 1.0 percent per year, and
will increase from a market value of $2.28 billion in
2010 to about $2.37 billion in 2014. In 2006, the
drug eluting stent (DES) sub-segment experienced
a significant slowdown due to price erosion and a
controversy about the long-term safety profile of
DES. Extensive market penetration (about 90%
in the U.S. and 70% in Europe) along with the
entrance of several new competitors caused unit
prices to decrease about 5 percent. In 2007,24
the DES market declined another 35% due to
continued pricing pressure and lower penetration
rates as clinicians switched from DES to bare metal
stents (BMS). The percentage of DES vs. BMS
25
fell from 80% to 75% in 2006 and to 62% in 2007.

Now that safety concerns about DES have subsided
and the next generation of drug eluting stents has
come onto the market, the BMS sub-segment is
expected to decline about 3.1 percent per year from
2010-2014.
The Aortic stent graft and Synthetic surgical graft

sub-segments are both expected to experience
exceptional growth increasing 14.4 and 11.7 percent
per year for the 4-year period, respectively.
Other primary cardiovascular device segments
include cardiac assist devices, prosthetic heart
valves, cardiovascular surgery, cardiovascular
monitoring and diagnostic devices, cardiovascular
prosthetic devices, electrophysiology, and external
defibrillators. Each of these segments is much
smaller than the three primary segments discussed
above, but as a combined group they comprise
about one-fifth of the cardiovascular devices
market. The electrophysiology segment is expected
to experience exceptional growth growing at a rate
of 11.9 percent per year from 2010-2014. The
cardiac assist devices and cardiovascular prosthetic
devices segments are both forecast to grow at a rate
which is more than double the average growth rate
of the overall cardiovascular devices market.
The PTCA balloon sub-segment is experiencing

significant growth of 8.0 percent per year and is
expected to grow from $566 million to $769 million
over the 4-year period. The cardiac catheter
sub-segment, including both guide and diagnostic
catheters, is also experiencing solid growth of 5.8
percent per year, and is forecast to grow from $532
million in 2010 to $666 million in 2014.
The Peripheral vascular devices segment is the
third largest segment in the cardiovascular devices
market, worth $2.1 billion in 2010 and expected to
grow at an above average rate of 5.6 percent per
year through 2014, reaching about $2.6 billion.
The Peripheral vascular stents sub-segment is less
than one-third the size of the Coronary stents
sub-segment, but it is growing at a much faster
rate (3.1% vs. 1.0%), and is expected to grow from
$634 million to $715 million between 2010-2014.
Figure 20 gives an overview of the major product

segments that make up the cardiovascular devices
market.
Figure 20 U.S. Cardiovascular Segmentation and Forecasts, 2010-2014 US$ Millions,

except CAGR. Note: All figures are rounded; the base year is 2010
Segment
2010
2011
2012
2013
2014
2010-2014
CAGR (%)
Cardiac Rhythm Management
6,478
6,527
6,586
6,657
6,737
1.0
Pacemakers
2,304
2,217
2,135
2,057
1,984
-3.8
Dual Chamber
1,246
1,169
1,096
1,028
964
-6.6
Single Chamber
1,058
1,048
1,039
1,029
1,019
-0.9
Implantable Cardioverter Defibrillator (ICD)
2,652
2,726
2,803
2,882
2,963
2.8
Dual Chamber ICDs
1,848
1,914
1,982
2,053
2,126
3.6
Single Chamber ICDs
804
812
820
828
837
1.0
Cardiac resynchronization therapy
1,521
1,583
1,649
1,718
1,791
4.2
Cardiac resynchron. therapy w/ defibrillator
1,465
1,532
1,602
1,674
1,750
4.5
Cardiac resynchron. therapy w/ pacemaker
55
51
47
44
40
-8.3
Interventional Cardiology
4,106
4,234
4,370
4,515
4,668
3.3
PTCA Balloons
566
611
659
712
769
8.0
Over the wire balloons
121
127
133
140
148
5.2
Rapid exchange balloons
440
479
521
567
617
8.8
Fixed wire balloons
0.0
Coronary Stents
2,280
2,301
2,323
2,345
2,369
1.0
Bare metal stents
362
352
341
331
321
-3.1
Drug eluting stents
1,918
1,949
1,982
2,014
2,047
1.6
Cardiac Catheters
532
563
595
629
666
5.8
Guiding catheter
206
219
232
246
261
6.1
Angiography catheter
326
344
363
383
404
5.5
Coronary Guidewire
348
359
369
380
391
3.0
Arteriotomy Closure Devices
159
165
171
178
185
3.9
Intravascular Ultrasound System (IVUS)
221
236
253
270
289
6.9
Intravascular Ultrasound Catheter
170
182
195
208
222
6.9
26
Intravascular Ultrasound System Console
51
54
58
62
67
7.1
Peripheral Vascular Devices
2,123
2,237
2,361
2,496
2,644
5.6
Peripheral VascularStents
634
653
673
694
715
3.1
Synthetic Surgical Grafts
99
111
124
138
154
11.7
Embolic Protection Device
62
65
69
73
77
5.6
PTA Balloon
674
698
721
746
771
3.4
Aortic Stent Graft
312
357
408
467
534
14.4
Inferior Vena Cava Filter
179
191
203
216
229
6.4
Peripheral Guidewire
162
162
163
163
163
0.2
Cardiac Assist Devices
437
468
502
539
578
7.2
Intra-aortic Balloon Pump
184
196
209
222
237
6.5
Total Artificial Heart
16
17
18
19
20
5.7
Ventricular Assist Devices (VAD)
236
255
275
297
321
8.0
Prosthetic Heart Valves
453
468
486
505
527
3.9
Tissue Heart Valves
359
382
406
432
459
6.3
Mechanical Heart Valves
94
87
80
74
68
-8.4
Cardiovascular Surgery
676
655
636
619
603
-2.9
Cardiac Ablation Devices
0.0
Beating Heart Surgery Systems
93
98
104
109
115
5.5
Cardiopulmonary Bypass Equipment
47
44
42
39
37
-6.2
Perfusion Disposables
532
510
488
468
448
-4.4
Cardiovascular Monitoring & Diagnostic Devices
386
402
418
436
454
4.1
Cardiovascular Prosthetic Devices
147
159
173
187
203
8.4
Electrophysiology
686
768
858
961
1,077
11.9
External Defibrillator
766
812
861
913
969
6.1
Total Cardiovascular Devices Market
16,257
16,730
17,252
17,827
18,459
3.2
Source: GlobalData, February 9, 2011
Recent Developments
Major drug and medical device manufacturers such
as Abbott Laboratories, Johnson & Johnson, and
others are seeking to acquire companies that are
focused on developing heart valve technology in an
effort to catch up with Edwards Lifesciences Corp.
(ELC), the global leader in heart valve technology.
ELCs new transcatheter heart valve, called Sapien,
in a clinical study cut death rates in patients too
sick to have open-heart surgery, and is now being
tested to see if it works as well in less frail patients
to reduce the recovery time from months to weeks.
If the results from the ongoing clinical trial are as
positive as the initial result, industry analysts believe
the market for the revolutionary new aortic valves
may reach $2.1 billion by 2015.25
5.2. MAJOR PLAYERS & MARKET

SHARE ESTIMATES
The pacemaker market is dominated by three
major players, Medtronic, St. Jude Medical and
Boston Scientific. Due to the high R&D costs in
this market, the barriers to entry are quite high.
Medtronic is the market leader with 50 percent
market share. St. Jude Medical is number two with
28 percent share and Boston Scientific is a distant
third with 18 percent share. Stanford Group Co.
estimates the U.S. market for pacemakers is about
$1.9 billion. The U.S. market for pacemakers is
about half of the world market.
27
Figure 21 Pacemaker Market Shares and Sales Volume in the U.S. in 2009
Market Share
$ Millions
Medtronic
50%
930
St. Jude Medical
28%
519
Boston Scientific
18%
346
Others
4%
68
Source: 2009 annual reports from the leading 3 companies
Likewise, in the Implantable Cardioverter Defibrillator (ICD) market, the same three companies dominate
the market. In 2009, Medtronic continued to be the worldwide market leader with a market share of about
46 percent followed by Boston Scientific with 29 percent and St. Jude Medical with 25 percent. From 20012005, the worldwide ICD market grew at an estimated 28 percent per year for the 5-year period. However,
growth declined significantly in the second half of 2005 and was flat in 2006 as a result of a number of
factors including adverse publicity relating to product recalls by Guidant and Medtronic. (In the U.S.,
the ICD market declined 6.3% in 2006). In 2007, the market stabilized and began to show slow growth.
Helping to support this growth trend was action by the Centers for Medicare and Medicaid (CMS) which
expanded the indications for ICD use that will be reimbursed by Medicare. In 2008, the ICD market was
estimated at $4.1 billion in the U.S. and $6.2 billion worldwide. The worldwide ICD market experienced
price declines of 1-2% in both 2008 and 2009 and is expected to weaken further in 2010. Nevertheless,
the worldwide ICD market is forecast to grow to $6.6 billion in 2010 and 7.0 billion in 2012 which is an
increase of about 3% per year.
Figure 22 Leading Implantable Cardiac Defibrillator (ICD) Firms in the U.S. in 2009
Market Share
US Sales ($ Millions)
Medtronic
46%
1,836
Boston Scientific
29%
1,248
St. Jude Medical
25%
998
Source: 2009 annual reports from the leading 3 companies + Standard & Poors Industry Surveys Healthcare Products & Supplies, February 4, 2010
In the drug eluting stent market, Boston Scientific

(BS) is the market leader. The Company rose from
the number four position with a market share of
7 percent in 2002 to become the market leader in
the U.S. with 53 percent market share in 2005. In
2006, BS drug eluting stent (DES) sales reached
$2.4 billion worldwide, but steadily declined to
$1.6 billion in 2008. In 2009, BS worldwide DES
sales rose to $1.7 billion and U.S. sales rose to $911
million. As such, BS maintained its leadership
position in the U.S. with a market share of 46
percent at the end of 2009. BS is the only company
in the industry that offers a two-drug platform
strategy. Nevertheless, the U.S. market for drug
eluting stents began to experience considerable
change starting in 2008. Medtronic received FDA
approval in February 2008 to market its Endeavor
Zotarolimus eluting stent and Abbott Laboratories
received FDA approval in July 2008 for its Xience
V Everlolimus eluting stent. Prior to 2008, only

Boston Scientific Johnson & Johnson had approval
to sell drug eluting stents in the U.S. BS estimates
the worldwide coronary stent market at a value of
$5.0 billion in both 2008 and 2009. Drug eluting
stents are estimated to represent approximately
80 percent of the dollar value ($4.0 billion) of the
worldwide coronary stent market in 2008. The
U.S. DES market is estimated at approximately
$2.0 billion in 2009. The following table shows the
estimated market shares of the various drug-eluting
stents in 2009 and 2011.
It is estimated that about 60% of drug-coated stents
are used off-label. (i.e. Outside the boundaries
approved by the FDA). While doctors are allowed
to prescribe stents to patients for off-label uses,
manufacturers cannot encourage off-label use.
28
Figure 23 Worldwide Drug Eluting Stent Market Shares, 2009-2011

2009 Share (%) (Worldwide)
2011 Share (%) (Worldwide)
Xience (Abbott Laboratories)
11
30
Promus (Boston Scientific)
20
Taxus (Boston Scientific)
35
18
Cypher (Johnson & Johnson)
30
17
Endeavor (Medtronic)
16
15
Source: Thomson Gale Market Share Reporter: 2010 cites Med-tech Analyzer, Credit Suisse Equity Research, September 11, 2008, p.44
The market penetration for drug eluting coronary

stents rose to 77% at the end of 2009 compared
with 73% at the end of 2008 and 62% at the end
of 2007. The penetration rate consistently rose
throughout 2008 and remained steady throughout
2009 indicating the U.S. DES market has recovered
and continues to strengthen.26 Pricing pressure is
expected to increase in the DES market because
of the increased competition from the entrance
of Xience and Promus. As such, Endeavor and
Cypher have been forced to cut prices and seek
volume deals. Pricing declined in the high singledigit range in 2008 and 2009 and is expected to
continue to decline at this rate in 2010.27
Stent Market Outlook
Over the past several years there were a number
of studies and adverse patient outcomes that
had a significantly negative impact on the overall
stent market and especially the drug eluting stent
segment. It appears that the controversy of safety
between bare metal stents and drug eluting stents is
coming to an end following a large European study
which found no increase in the number of deaths or
heart attacks two years after the drug-coated stents
were implanted. The study confirms that drug
eluting stents are as safe and effective as bare metal
stents for large coronary arteries. In addition to an
improved safety profile, patients treated with drugeluting stents had fewer repeat procedures.28
A 5-year study called BARI 2D sponsored by the
National Institutes of Health and several drug
manufacturers investigated the results of using new
device technologies such as angioplasty and stents
and new diabetes drugs such as Actos (Takeda)
and Avandia (GSK), and compared them with the
outcomes using older cheaper options such as beta
blockers and other generic heart drugs. The study
found that stents and the new diabetes drugs were
no better than older medicines at preventing the
deadly consequences of major heart diseases. The
findings could make it difficult for stents to sustain a
recent recovery that followed a sales decline caused
by a 2007 study that questioned their effectiveness.
Patients who had an immediate stenting procedure
to open a clogged artery had a 10.8% death rate
during the 5-year study versus 10.2% for those
who took generic medicines and waited. The
U.S. economic stimulus bill passed in February

2009 allocates $1.1 billion for funding similar
comparative effectiveness studies.29
5.3. Emerging Technologies
Boston Scientific (BS) holds leadership positions
across numerous device markets and therapeutic
areas. Following its acquisition and integration of
Guidant, BS has reprioritized its R&D efforts to
focus on restoring its cardiac rhythm management
(CRM) business, and retaining its drug eluting
stent leadership position. In addition, BS is
investing R&D resources in balloon catheters, guide
catheters, guidewires, and neuromodulation. On
January 19, Boston Scientific announced that it
would acquire Atritech, a privately held company
developing the WATCHMAN, a device used to
close the left atrial appendage (LAA) in patients
with atrial fibrillation. Atritech completed the
first randomized clinical trial for a device used to
close LAA. The 800-patient randomized trial,
PROTECT-AF, demonstrated a 38% relative risk
reduction for stroke, cardiovascular death, and
systemic embolism compared to long-term warfarin
therapy. The following technology areas are listed
in the companys annual report and press releases as
a partial list of future product growth areas for the
company.
TECHNOLOGY AREAS:
Acute Ischemic Stroke
BS is using its experience in vascular technologies
to explore a variety of treatment options including
a stent-based treatment that would push a clot
against the wall of a large vessel so that blood flow
could quickly be restored. The faster blood flow is
restored the less damage to the brain. The use of a
stent can also give physicians more time to consider
additional treatment alternatives.
Atrial Fibrillation
BS is developing a new technique for treating Atrial
Fibrillation which uses a cryogenic balloon on the
end of a catheter. The balloon will freeze and
isolate tissue around the four veins, a procedure
that will be less demanding and require much less
time than radiofrequency ablation. (The current
29
technique uses radiofrequency ablation and is a

long, technically demanding procedure).
Coronary Artery Disease
BS is developing new stents that will minimize the
amount of polymer required to deliver therapeutic
drugs. At the end of 2010, the Company plans
to initiate a first-in-man study of a stent with a
reduced amount of bioerodable polymer that is
applied only to the outside of the stent and dissolves
as the drug is released.
Hypertension
BS is exploring several non-drug treatments
including nerve ablation and electrical stimulation
for the treatment of hypertension. This is in
response to the growing worldwide prevalence of
hypertension and as an alternative treatment for
patients who do not respond well to drug therapy.
the placement of stents, require a leg incision to

gain access to the femoral artery and the closure
process can be a time-consuming and laborintensive.
Other Emerging Technologies
Medtronic, Inc. also holds leadership positions
across numerous device markets and therapeutic
areas. The company expects to spend $8-$10
billion on research & development over the next
5-years and is focused on growing through internal
developments or products acquired through small
scale acquisitions. Some of the cardiovascular
technology areas the company is focusing on
include new implantable heart rhythm devices,
replacement heart valves that do not require major
surgery, pacemakers designed to work safely in MRI
scanners, and defibrillators that reduce the number
of unnecessary shocks.31
Aortic Valve Surgery System
Intravascular Ultrasound
Imaging X-ray Combination
BS announced on May 24, 2010 collaborations
with Philips Healthcare and Siemens Medical
Solutions to enable the use of its iLab Ultrasound
Imaging System with the Philips Allura Xper
and the Siemens AXIOM Artis and Artis
zee interventional X-ray systems. Intravascular
ultrasound (IVUS) technology is designed to
provide physicians a 360-degree view inside the
heart and coronary vessels to assist with diagnosis
and to generate a more accurate image of the
diseased vessels than is possible with angiography
alone. The iLab System is designed to be installed
directly into a cardiac catheterization laboratory
or radiology suite alongside these X-ray systems,
enabling physicians to more readily incorporate
IVUS technology into their procedures. BS
previously announced a similar collaboration with
GE Healthcare and its Innova System.30
Peripheral Vascular Disease
BS is developing a drug-coated balloon to treat
peripheral vascular disease that would be inflated
for about a minute and allow a drug to be
transferred from the balloon to the appropriate
site within the vessel. The drug would remain
active for about three months to treat the blockage,
and there would potentially be no need for a
stent. Physicians treating this disease currently
lack adequate solutions for addressing peripheral
vascular challenges. The Company plans a first-inman study of a drug-coated balloon in 2011.
Edwards Lifesciences Corp. announced on January

25, 2010 it has completed first in man procedures
and initiated a feasibility study in Europe for a novel
minimally invasive aortic valve surgery system,
known as Project Odyssey. The investigational
Odyssey aortic valve replacement system is
designed to enable surgeons to rapidly deploy a
heart valve that offers excellent hemodynamics and
proven durability, without requiring a traditional
sutured approach. The procedure is designed to
enable a faster procedure, shorter patient time on
cardiopulmonary bypass and a smaller incision.32
Arctic Front Cardiac
CryoAblation Catheter System
Medtronic announced on March 17, 2010 it
has completed a Pre-Market Approval (PMA)
submission with the FDA requesting approval for
the Arctic Front Cardiac CryoAblation Catheter
System. The system is designed for patients with
paroxysmal atrial fibrillation (PAF), an irregular
quivering of the upper chambers of the heart
that starts and stops on its own. The Arctic Front
system uses cryoablation, or freezing, to ablate
heart tissue between the pulmonary veins and the
left atrium. The goal of an ablation is to stop the
arrhythmia at the source. During cryoablation,
a coolant is released into the catheters balloon
causing the balloon to freeze and ablate the heart
tissue. Freezing helps the balloon maintain contact
with the tissue being ablated. The Medtronic Arctic
Front Cardiac CryoAblation Catheter System is
investigational and not currently available for sale in
the U.S.33
Vascular Closure
Bioresorbable Vascular Scaffold Technology
BS is working to develop a vascular closure device
that will shorten and simplify the closure process,
and will be easier to use than existing products.
Currently, many less-invasive procedures, such as
Abbott Laboratories announced on March 15, 2010

positive results from the first 101 patients enrolled
in the second phase of the ABSORB clinical trial,
30
demonstrating that its fully bioabsorbable drug

eluting coronary stent was able to restore blood flow
with no cases of blood clots or repeat procedure.
ABSORB is the worlds first clinical trial evaluating
the safety and efficacy of a fully bioabsorbable
drug eluting stent platform for the treatment of
coronary artery disease. The everolimus eluting
bioabsorbable stent is made of polylactic acid and
is designed to restore blood flow by propping a
clogged vessel open, and providing support until
the blood vessel heals. The stent is then designed to
be slowly metabolized by the body and completely
absorbed over time. The continuing positive
results of the ABSORB trial and the clinical
benefits demonstrated to date show promise that
a bioresorbable scaffold is on its way to becoming
a clinical reality and will be the next revolution in
interventional cardiology.34
Edwards Sapien XT Transcatheter Aortic

Heart Valve and NovaFlex Transfemoral and
Ascendra 2 Transapical Delivery Systems
Edwards Lifesciences Corp. announced on March
2, 2010 that it received CE Mark for its Edwards
Sapien XT transcatheter aortic heart valve, as
well as its NovaFlex transfemoral and Ascendra 2
transapical delivery systems. The Edwards Sapien
XT transcatheter valve enables doctors to replace
failing aortic valves without major surgery. The
leaflet design of this new valve is modeled after
Edwards' clinically proven aortic tissue valves and
its cobalt chromium frame provides improved
radial strength and enhanced circularity. In the
U.S., the Edwards Sapien valve is an investigational
device being studied as part of the world's only
randomized, pivotal clinical trial of a transcatheter
aortic valve and is not yet commercially available.35
Complete SE Vascular Stent System

Medtronic announced on April 21, 2010 that it
received FDA approval to market the Complete
SE Vascular Stent System to be used for the
treatment of peripheral arterial disease in the iliac
arteries, major blood vessels within the pelvis that
supply blood to the lower extremities. The stent
system provides physicians with a new treatment
option that offers significant benefits for patients
with narrowed iliac arteries due to peripheral
vascular disease. The system features several novel
advances, including an innovative dual-deployment
delivery system with a unique triaxial design. The
new delivery system is made up of an inner shaft,
a retractable sheath and a stabilizing sheath that
reduces friction and allows the retractable sheath
to move back freely. This decreases the amount of
force required to deploy the stent, thereby making
deployment easy and precise.
Edwards SAPIEN Pulmonic
Transcatheter Heart Valve
Edwards Lifesciences Corp. announced on May
26, 2010 receipt of the CE Mark for the Edwards
SAPIEN pulmonic transcatheter heart valve. The
valve is designed to be an alternative to surgical
valve replacement for patients suffering from
congenital heart disease of the pulmonic valve.
In the U.S., this valve is an investigational device
currently being studied in the COMPASSION
clinical trial. The valve's leaflet design is modeled
after Edwards' clinically proven aortic tissue valves
and its stainless steel frame provides high radial
strength. Prior to delivery, the bovine pericardial
tissue valve is compressed onto a balloon to the
approximate diameter of a pencil. It is then
threaded through the patient's circulatory system
using the RetroFlex 3 transfemoral delivery system,
which enables accurate deployment of the valve
across the patient's pulmonary valve. The heart
valve gives clinicians the potential to eliminate one
of the many open-chest procedures that their young
congenital heart patients will face in their lifetimes.
Express LD Iliac Premounted Stent

System for Use in Iliac Arteries
Boston Scientific Corp. announced on March
11, 2010 it received FDA approval to market the
Express LD Iliac Premounted Stent System for
use in iliac arteries. The Express LD Iliac Stent is
the first and only low-profile, premounted, balloonexpandable stent approved by the FDA for use in
treating iliac artery disease. The Company said it
plans to launch the product immediately in the U.S.
HeartMate(R) II Left Ventricular Assist
System
Thoratec Corp. received on January 20, 2010 FDA
approval to market its Heartmate II LVAS (Left
Ventricular Assist System) as destination therapy
for use in patients with New York Heart Association
(NYHA) Class IIIB or IV end-stage left ventricular
failure who have received optimal medical therapy
for at least 45 of the last 60 days, and who are
not candidates for cardiac transplantation. The
device was previously approved for use as a bridgeto-transplantation (BTT) on April 21, 2008. The
HeartMate II is a next generation heart assist device
designed to provide long-term cardiac support for
patients with end-stage heart failure. It is the first
continuous flow device to receive FDA approval for
this intended use in the U.S.
Impella Heart Pump with Blood Pressure
Sensor
Abiomed, Inc. announced on January 27, 2010 its
has formed a strategic partnership with Opsens
to integrate Opsens fiber optic sensor technology
into the Impella catheter to provide robust blood
pressure measurements that can be used to enhance
Impella's performance and ease-of-use. Impella,
the World's Smallest Heart Pump, has supported
more than 1,600 patients in the U.S. and more than
3,000 patients worldwide. During 2010, product
enhancements to the Impella have included a new
31
introducer sheath and a quick set-up software and

kit, which have allowed customers to reduce the
Impella set-up time from 11 minutes to 2 minutes.
St. Jude Medical- LightLab OCT Imaging System
In July 2010, St. Jude Medical completed its
acquisition of medical technology firm LightLab
Imaging Inc. for roughly $90 million and
integrated it into St. Judes cardiovascular division.
Massachusetts-based LightLab specializes in
optical imaging technology that helps physicians
diagnose and treat cardiovascular conditions. The
company is a pioneer in the development of Optical
Coherence Tomography (OCT), a next-generation
imaging technology.
spectroscopy to help cardiologists identify and

characterize the plaques that complicate stenting
and are associated with acute coronary events. The
NIR spectroscopy identifies the chemical content of
the plaques; the IVUS provides an image of plaque
structure and stent features. InfraReDx's firstgeneration LipiScan NIR system is already in use
at approximately 25 cardiac centers in the U.S. and
is the only FDA-cleared device for the detection of
lipid core coronary plaques (LCP). The Company
expects to conduct a broad commercial launch
of the system within the U.S. by year-end 2010,
and anticipates regulatory approval and launch in
Europe during 2011.
LightLab received clearance from the FDA in May

2010 to market its first OCT products (C7-XR
imaging system and companion C7 Dragonfly
imaging catheter) in the U.S. These products are
also approved for marketing in Europe and are
currently awaiting regulatory clearance in Japan.
LightLabs OCT technology has been used by
the clinicians in 40 countries across the globe to
perform high resolution imaging of vessel structure
in numerous coronary interventions.
LevacorTM Ventricular Assist Device
The OCT market has been projected to grow at a

double-digit rate over the next five years. The IVUS
market is growing at an annual rate of 10%15%
and is forecasted to reach $500 million in 2010. The
OCT imaging market could potentially grow at a
faster rate than IVUS in future, offering a lucrative
business prospect for St. Jude.
With the LightLab acquisition, St. Jude Medical
is now the first company to offer a comprehensive
product portfolio that includes both OCT and the
companys Fractional Flow Reserve (FFR) technology.
FFR technology, which was acquired by St. Jude
through its acquisition of Radi Medical in 2008, is
an index that identifies and measures the severity of
coronary artery narrowing.
This unique combination (OCT-FFR) provides
cardiologists with comprehensive information
to assess and determine the lesions that warrant
coronary interventions, resulting in better treatment
outcomes.
The acquisition of LightLab has enabled St. Jude to
compete and expand in the intravascular imaging
market. It also accelerates its cardiovascular business
by offering a comprehensive suite of novel products.
St. Jude expects OCT to offer an additional $20
million in revenues to its cardiovascular business
during the second half of 2010.
LipiScan IVUS Coronary Imaging System
InfraReDx, Inc. announced on September 1, 2010
it received FDA approval to market the LipiScan
IVUS Coronary Imaging System. LipiScan IVUS
is the first cardiac catheter to combine intravascular
ultrasound (IVUS) and near-infrared (NIR)
World Heart Corp. announced on January 8,

2010 that it has received unconditional approval
from the FDA for the bridge-to-transplant (BTT)
study of the Levacor Ventricular Assist Device
(VAD). The Levacor VAD is intended for use,
inside and outside of the hospital, as a BTT in
cardiac transplant candidates with presumed nonreversible left ventricular failure. The device is a
fourth-generation rotary VAD, and is the only fully
magnetically levitated, bearingless, implantable
centrifugal pump to move into clinical trial. By
using magnetic levitation to fully suspend a spinning
rotor, the Levacor VAD's only moving part, the
pump is designed to eliminate wear and to provide
unobstructed clearances for blood flow across a
wide range of operation.
Medtronic Melody Transcatheter
Pulmonary Valve and Medtronic
Ensemble Transcatheter Valve
Delivery System
Medtronic Heart Valves, Inc. received on January
25, 2010 a Humanitarian Device Exemption
(HDE) from the FDA to market the Melody
Transcatheter Pulmonary Valve. The device is
a manufactured replacement pulmonary heart
valve that had already been previously repaired.
The Melody valve is made from a cows jugular
vein valve that is sewn into a small metal stent.
The Medtronic Ensemble Transcatheter Valve
Delivery System is a catheter that helps guide the
Melody into the heart. This innovative medical
device is the first transcatheter heart valve to receive
FDA approval.
MyoCell Heart Muscle Regeneration
Therapy
Bioheart, Inc. is conducting a Phase III clinical
trial for its MyoCell heart muscle regeneration
treatment. MyoCell uses myoblasts, cells that are
precursors to muscle cells, from the patients own
body. The myoblasts are removed from a patients
thigh muscle, isolated, grown through Biohearts
proprietary cell culturing process, and injected
directly in the scar tissue of a patients heart. By
32
using myoblasts obtained from a patients own body,

Bioheart believes MyoCell is able to avoid tissue
rejection and instances of the cells differentiating
into cells other than muscle.36
Prochymal for Acute Myocardial Infarction
Osiris Therapeutics, Inc. is working with
Mesenchymal stem cells (MSCs) for the prevention
of heart failure resulting from acute myocardial
infarction, or heart attack. MSCs are capable of
forming a variety of highly specialized cell types
including bone, cartilage, muscle, tendon, fat, liver
and many others. MSC integration within diseased
or damaged tissue has the effect of favorably
altering the inflammatory response and has
demonstrated the ability to stimulate the formation
of new blood vessels. The Company is currently
conducting a Phase II clinical trial.37
Revo MRI SureScan Pacing System
Medtronic, Inc. announced on March 19, 2010
that the FDA Circulatory System Devices Panel of
the Medical Devices Advisory Committee voted
unanimously in favor of approval with conditions
of the Revo MRI SureScan pacing system
designed as MR Conditional, or safe for use in
Magnetic Resonance Imaging (MRI) systems under
specified conditions. MRI is critical in the diagnosis
of many serious conditions; however, patients with
current pacemakers most often do not have access
to this vital technology. It is estimated that more
than 200,000 patients annually in the U.S. have to
forego an MRI scan because they have a pacemaker
due to the risks involved, including interference
with pacemaker operation, damage to system
components, lead or pacemaker dislodgement,
heating of the lead tips and unintended cardiac
stimulation.
ReZolve Absorbable Stent
Reva Medical is developing an experimental
coronary stent that is absorbed by the body over
time. Unlike current metal stents, the ReZolve
stent is composed of a soluble plastic that fuses with
the artery wall then slowly breaks down into water
and carbon dioxide in a process lasting four years.
If absorbable stents prove to be as nimble during
deployment and as strong at propping open arteries
as metal stents, but reduce the risk of blood clots
by absorbing over time, then they should take over
the stent market. Reva initially will seek regulatory
approval to sell the stent in Europe and Australia
before pursuing clearance from the FDA.38
Trifecta Tissue Heart Valve
St. Jude Medical announced on March 2, 2010
it received CE Mark approval for the Trifecta
valve. The Trifecta tissue valve is used to replace
a patient's diseased, damaged or malfunctioning
aortic heart valve, which controls blood flow
from the heart to the rest of the body. The

next-generation tissue valve has a tri-leaflet
stented pericardial design which offers excellent
hemodynamic performance, or nearly unobstructed
blood flow, in order to mimic as closely as possible
the flow of a natural, healthy heart. The unique
valve design includes leaflets manufactured from
pericardial tissue attached to the exterior of the
valve stent which open more fully and efficiently to
perform like a natural heart valve.
Unify Cardiac Resynchronization Therapy
Defibrillator and Fortify Implantable
Cardioverter Defibrillator
St. Jude Medical announced on May 12, 2010
it received FDA approval to market the Unify
cardiac resynchronization therapy defibrillator
(CRT-D) and Fortify implantable cardioverter
defibrillator (ICD). The new devices feature
advanced battery technology and circuitry that
allow for the smallest device footprint in the
industry and rapid charge times, without any
compromise in device longevity or power. In
addition, the devices' narrow shape, along with
their small footprint, allows physicians to implant
them using a smaller incision, leading to less time
spent closing the incision and a reduced scar for the
patient.39
Wireless Cardiac Monitoring Device
CardioMEMS announced on June 1, 2010
successful results from its clinical trial for a wireless
cardiac monitoring device the company is currently
developing. The wireless heart failure sensor is
an innovative miniature device that is implanted
into the patients pulmonary artery using a simple,
catheter-based technique. Following the procedure,
patients perform wireless measurements of their
pulmonary artery pressure from home. The
pressure data is immediately transmitted to a secure
database and is available for review by the patients
physician or nurse on the CardioMEMS Champion
website. If a problem is detected, including fluid
buildup in the lungs, doctors can adjust medication
or make other treatment decisions, often keeping
the patient out of the hospital. On September 6,
2010, St. Jude Medical purchased a 19% share of
the company for $60 million and has an option to
buy the remaining shares if certain milestones are
met.
5.4. MAJOR COMPETITORS IN THE
CARDIOVASCULAR MARKET
Abbott Laboratories, Inc. is a global health
care company that is doing business in over
130 countries. Abbotts primary businesses are
pharmaceuticals, nutritionals, and medical products
which include diagnostics and cardiovascular
devices. Abbott is the 3rd largest company in the
vascular care market. In 2009, Abbotts Xience
V drug eluting stent continued to be the number
33
one DES on the U.S. market. Abbott also markets

a broad portfolio of endovascular and coronary
technologies, including balloons, guide wires and
vessel closure devices. Abbott employs over 73,000
persons and had net sales of $30.765 billion in
2009. www.abbott.com
Abiomed, Inc. is leading provider of medical
devices for circulatory support of patients with
heart failure. The Company offers a line of heart
pumps, intra-aortic balloons and ventricular assist
devices. Products include the Impella 2.5 (the
worlds smallest blood pump), BVS 5000 blood
pump, AB5000 Ventricle for use as a LVAD, RVAD
of BiVAD for temporary support from heart attack,
and the AbioCor fully implantable replacement
heart for severe biventricular hear failure when
chronic patients are not eligible for a heart
transplant. The Company employs 386 persons
and had net sales of $72.5 million in 2009.
www.abiomed.com/index.cfm
Boston Scientific is a leading worldwide
developer, manufacturer and marketer of
medical devices that are used in a broad range of
interventional medical specialties. In 2009, BS
was organized into six business groups: (1) CRM
which includes Cardiac Rhythm Management
and Electrophysiology; (2) Cardiovascular
which includes Interventional Cardiology and
Peripheral Interventions; (3) Neurovascular; (4)
Endoscopy; (5) Urology/Womens Health; and
(6) Neuromodulation. Boston Scientific employs
more than 26,000 persons and had net sales of
$8.188 billion in 2009. Seventy-four percent of
the companys revenues came from the CRM
(31%) and Cardiovascular (43%) groups. www.
bostonscientific.com
Cordis Corporation, a subsidiary of Johnson
& Johnson, is a global leader in developing
and marketing devices for circulatory disease
management. The companys product line
includes stents, balloons, and catheters which are
used in treating cardiovascular disease and related
conditions. Products are marketed by clinical
application through five main divisions:
(1) Cordis Cardiology for cardiovascular disease
management; (2) Cordis Endovascular for the
treatment of peripheral vascular and biliary
obstructive diseases; (3) Conor Medsystems for
controlled vascular drug delivery technologies; (4)
Biosense Webster for electrophysiology and medical
sensor technology in cardiovascular procedures;
and (5) Cordis Biologics Delivery Systems in
the emerging field of biologics delivery. Cordis
is a world leading developer and manufacturer
of breakthrough products for interventional
medicine, minimally invasive computer-based
imaging, and electrophysiology. Worldwide
sales for Cordis totaled $2.679 billion in 2009, a
decrease 10.3 percent over 2008. (U.S. sales of
this subsidiary are not broken out separately in the
J&J consolidated financial statements.) Lower sales

of the CYPHER Sirolimus-eluting Stent, the
largest product in the Cordis franchise, were due to
increased global competition. www.cordis.com
Edwards Lifesciences is a global leader
in products and technologies to treat advanced
cardiovascular disease, the global leader in acute
hemodynamic monitoring, and the number-one
heart valve company in the world. The Company
is based in Irvine, California, and has more than
6,400 employees worldwide. Edwards sells its
products in more than 100 countries and reported
net sales of $1.32 billion in 2009.
www.edwards.com
Ethicon, Inc., a subsidiary of Johnson & Johnson,
is a worldwide developer, manufacturer and
marketer of products used in cardiovascular surgery.
The Companys CARDIOVATIONS division
(one of four divisions) features minimally- and
less-invasive surgical devices that help restore and
improve cardiac health. Worldwide sales for Ethicon
totaled $4.12 billion in 2009, an increase of 7.3
percent over 2008. Headquartered in Somerville,
New Jersey, ETHICON is currently doing business
in 50 countries, and employs approximately 8,500
persons worldwide. www.ethiconinc.com
Medtronic is a world leading medical technology
company with a focus on treating patients with
chronic disease. The company is organized in
seven operating segments: (1) Cardiac Rhythm
Disease Management (CRDM); (2) Spinal;
(3) Neuromodulation; (4) Cardiovascular; (5)
Diabetes; (6) Surgical Technologies; and (7) PhysioControl. Primary products in the CRDM and
cardiovascular areas include medical devices and
technology to treat bradycardia, tachyarrhythmia,
heart failure, atrial fibrillation, coronary vascular
disease, endovascular disease, peripheral vascular
disease, and heart valve disease. In 2009, net
sales increased by $1.084 billion or 8.0 percent to
reach $14.599 billion. The increase in net sales
was driven by growth in all operating segments.
The Cardiac Rhythm Disease Management
segment which accounts for about 34 percent of
the companys total revenue increased to $5.014
billion (+1%) followed by Spinal $3.400 billion
(+14%), Cardiovascular $2.437 billion (+14%),
Neuromodulation $1.434 billion (+14%), Diabetes
$1.114 billion (+9%), Surgical Technologies $857
million (+10%), and Physio-control $343 million
(+4%). Consolidated U.S. sales for all product
segments totaled $8.997 billion. The Company
employs approximately 41,000 persons worldwide.
www.medtronic.com
St. Jude Medical, Inc. develops, manufactures
and distributes cardiovascular medical devices for
the global cardiac rhythm management (CRM),
cardiac surgery and cardiology and atrial fibrillation
therapy areas, and also neurostimulation medical
devices for the management of chronic pain.
34
The Company is organized in four operating

segments: (1) Cardiac Rhythm Management,
(2) Cardiovascular, (3) Neuromodulation, and (4)
Atrial Fibrillation. The Company's principal CRM
products are bradycardia pacemaker systems,
tachycardia implantable cardioverter defibrillator
systems and electrophysiology catheters. Its
principal CV products are mechanical and tissue
heart valves, and valve repair products, vascular
closure devices, angiography catheters, guidewires
and hemostasis introducers. In 2009, the company
had net sales of $4.681 billion, an increase of 7.3
percent over 2008. SJM employs approximately
14,000 worldwide. The principal geographic
markets for St. Jude Medical's products are the
United States, Europe and Japan. The company
also sells its products in Canada, Latin America,
Australia, New Zealand and the Asia-Pacific region.
www.sjm.com
Teleflex Medical, formerly Arrow International,
is a subsidiary of Teleflex Inc. The Company
develops, manufactures and markets cardiac
care products that are used for the diagnosis and
treatment of patients with heart and vascular
disease. The medical products segment is organized
into four product groups: Critical Care, Surgical,
Cardiac Care and OEM and Development
Services. Teleflex Medical has a line of disposable
critical care catheterization products which are used
primarily to access the central vascular system for
administration of fluids, drugs and blood products.
These products are also used for patient diagnosis,
monitoring, and pain management. Teleflex
Medical is a leading supplier of central vascular
access catheterization products worldwide. The
parent company, Teleflex Inc., is a diversified
company with annual revenues of $1.9 billion in
2009. Teleflex Medical contributed $1.45 billion
to the total in 2009. The company employs
approximately 12,700 people.
www.teleflexmedical.com
Thoratec Corporation is the world leader in
mechanical circulatory support and has a product

portfolio to treat the full range of clinical needs for
advanced heart failure. The Companys Thoratec
VAD System (ventricular assist device) can be
used as both a bridge to transplant (BTT) and for
recovery from open-heart surgery. More than 4,300
of these devices have been used in the treatment of
over 2,800 patients worldwide. In April 2008, the
company received FDA approval for use as BTT
for its HeartMate II, a next-generation VAD with
a lifespan longer than other currently available
devices. In Janaury 2010, the FDA granted
approval for the device to be used as destination
therapy (DT) in heart failure patients. More than
1,150 patients worldwide have been implanted
with the HeartMate II as of the end of 2007.
The Company is also a leader in the research,
development and manufacture of implantable left
ventricular assist systems (LVAS). Thoratec also
supplies whole-blood coagulation testing equipment
and related disposables, as well as single-use
skin-incision devices through its wholly-owned
subsidiary, International Technidyne Corporation
(ITC). In 2009, the company had net revenues of
$373.9 million, an increase of 19.3 percent over
2008, and employed 1,258 persons.
www.thermocardio.com
WorldHeart Corporation is focused on the
development of the Levacor Rotary VAD, a next
generation rotary device that uses a magnetically
levitated rotor with no moving parts subject to
wear. In January 2010, the company received an
unconditional Investigational Device Exemption
(IDE) from the FDA to conduct a bridge to
transplant study for the device. WorldHeart is also
developing the PediaFlowTM, a small magnetically
levitated, axial rotary VAD for children which is
currently under pre-clinical development. The
Company had net revenues of $5,000 and 53
employees in 2009. www.worldheart.com
The most common cause of hip and knee
6. Orthopedics
6.1. FACTS AND FIGURES
GlobalData estimates the global orthopedic devices
market was valued at $38.9 billion 2010. U.S.
sales of orthopedic devices totaled about $19.7
billion, or about 51 percent of worldwide sales.
Orthopedic devices are used for the treatment
of musculoskeletal diseases or injuries. The
major product groups are artificial joints, spinal
implants, devices for fracture repair (mainly intramedullary nails, plates, and screws), orthobiologic
formulations, and devices or equipment for
arthroscopy. The weakened U.S. economy has

slowed growth in some elective procedure areas
while new technologies and increasing procedure
rates are continuing in other areas. In 2010, the
expected growth rate of the overall orthopedic
devices market was estimated to only increase about
4 percent per year over the next several
years.40 Macroeconomic pressures are perceived to
limit future revenue growth.
35
However, as the U.S. economy recovers healthcare

utilization and procedure volumes may quickly
increase again. Musculoskeletal diseases are by far
the most common primary medical condition in the
United States. Treatment costs and lost wages are
estimated to have reached 7.7% of GDP and account
for the majority of lost work and sick days.41 The
demographic trends strongly continue to be in favor
of orthopedic interventions. Except for injuries,
musculoskeletal conditions are found in increasing
frequency in an aging population. The number of
persons afflicted with osteoarthritis or osteoporosis
increases substantially with age. Osteoarthritis
is the predominant diagnosis leading to joint
replacement. Osteoporosis, which is characterized by
low bone mass and deterioration of bone structures,
significantly increases the risk of fractures.
Patient influence and involvement can also boost

procedure volumes substantially. Increased access
to healthcare a major target of the current U.S.
healthcare reform legislation is to provide insurance
coverage for up to an additional 32 million
Americans - is seen as a driver for mid- to long-term
growth.
FDA regulatory changes, healthcare reform,
evidence based medicine, and reimbursement
issues will all tend to increase costs and put more
downward pressure on prices and margins across
the entire market. While the orthopedic market
grew at double-digit rates during the last decade,
the industry will likely have to adapt to single digit
growth rates going forward. Whether these rates
will be low or high single digits will depend on the
future growth of the gross domestic product in the
United States and the way in which healthcare
reform is enacted.
Figure 24 Leading Competitors in the Worldwide Orthopedics Market in 2010
6.3% Biomet
6.7% S&N
9.4% Synthes
Other
28%
Stryker 14.5%
J&J DePuy 14.2%
10.3% Medtronic
10.6% Zimmer
The worldwide orthopedics market has 7 major

companies that comprise about 72 percent of the
market. In addition, there are a number of smaller
companies that make up the remaining 28 percent.
In recent years, the industry has undergone
consolidation. Figure 24 shows the leading
companies in the area of orthopedic devices and
equipment, namely, Stryker, DePuy (J&J), Zimmer,
Medtronic, Synthes, Smith & Nephew, and Biomet.
GlobalData estimates that the U.S. orthopedic
devices market was valued at $19.7 billion in 2010,
and grew at a rate of 8.6 percent per year from
2003-2010. The double-digit growth rates at the
beginning of this period, however, decelerated
significantly during 2009 and even more so in 2010.
The major companies including DePuy, Stryker,
Zimmer, Synthes and Biomet reported very low
single digit growth rates, and smaller manufacturers
reported very small increases. We, therefore,
estimate that the market for the major segments of

hips, knees, and spine was almost flat in 2010.
The most dominant segment within the orthopedic
market is artificial joints. This reconstruction
segment grew 6.9 percent per year from 2003-2010.
Implants for spinal surgery grew even faster with
a CAGR of 12.2 percent. The Orthobiologics
segment, where the main indications were also
in the field of spinal procedures, experienced
exceptional growth increasing 18.6% per year for
the 7-year period. These same three segments will
experience the most real growth in the orthopedic
devices market from 2010 to 2015. However, the
rate of growth in the spinal surgery devices segment
is expected to decelerate considerably. Figure 25
shows the value of the primary segments of the U.S.
orthopedic devices market in 2010 and the forecast
for each segment through 2015.
36
Figure 25 U.S. Orthopedic Devices Market 2010-2015 (in US$ millions)

Market Segment
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR %)
Joint Reconstruction
7,700
8,409
9,189
10,049
10,996
12,041
9.3
Spinal Surgery
4,168
4,441
4,732
5,045
5,381
5,741
6.6
Orthobiologics
2,731
3,121
3,574
4,102
4,720
5,442
14.8
Trauma Fixation
2,213
2,338
2,469
2,609
2,758
2,916
5.7
Arthroscopy
1,183
1,249
1,321
1,397
1,478
1,565
5.8
Orthopedic Braces & Supports
700
738
777
820
864
911
5.4
Orthopedic Prosthetics
430
451
473
497
521
547
4.9
Cranio Maxillofacial Fixation
316
337
361
386
414
443
7.0
Orthopedic Accessories
296
303
310
317
323
330
2.2
Orthopedic Reamers
15
16
16
17
18
18
3.7
Total
19,753
21,402
23,222
25,238
27,472
29,954
8.7
The top four segments comprise 84 percent of the of the U.S. orthopedic device market and will be
discussed in more detail in subsequent sections of this chapter. Reconstructive joint implants will remain
the largest segment in the field as an ever increasing elderly population will demand more procedures.
Figure 26 U.S. Orthopedic Device Market Segmentation, by Product Area, in 2010
21.1% Spinal
39%
Joint
Reconstruction
Orthobiolgics 12.8%
Trauma 11.2%
Arthroscopy
6%
Braces &
Supports
3.5%
Prosthetics
2.2%
Cranio
Maxillofacial
1.6%
0.1% Reamers
1.5% Accessories
As with many fields in the medical device sector,

the aging population will have a direct effect on
the demand for orthopedic products and services.
The majority of orthopedic implant patients are
between 55 and 75 years of age, primarily due to
osteoarthritic changes. This age group is currently
estimated at greater than 56 million people and is
expected to grow by about 30 percent over the next
ten years to more than 73 million persons. With
the first of the 78 million baby boomers having
entered this age range during the past ten years,
a significant expansion is already occurring. In
addition, doctors are reporting an increase in the
number of procedures performed on individuals in
their 40s and 50s. In the past, procedures on this
younger age group were discouraged because the
lifespan of an implant, which averaged 10-15 years,
required recipients to undergo two or possibly three
replacements during their lifetime. Now, better
materials and technologies are increasing the lifespan
of implants. This being the case, the trend to include
40 50 year-old patients is continuing to gain
momentum as the life span of implants increases.
Joint Reconstruction
The U.S. orthopedic reconstructive joint replacement
market had an estimated value of $7.7 billion in
2010. Knee replacement is the largest segment with
an estimated market value of just under $4.2 billion
followed by Hip replacement valued at $2.95 billion
and Shoulder replacement valued at $301 million.
Stryker Corp., one of the leading companies in
the joint reconstruction market, estimates that the
knee replacement market will grow at a rate of
about 2 percent over the next several years and
the hip replacement market will grow at a rate of
only one percent.42 The slower growth in the hip
and knee market segments is due to a relatively
high U.S. unemployment rate and related loss of
health insurance, an increase in cost sharing by
health insurance policies, and the elective nature
of these types of procedures. These factors will
increase competition among manufacturers and
lead to increased price pressure on the products they
offer.43 Hospitals accounted for 92 percent of joint
reconstruction sales in 2010. The balance went to
clinics (5%) and long term care facilities (3%).
37
Figure 27 U.S. Orthopedic Reconstructive Joint Replacement Market, by Value (US$ millions)
Market Segment
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR)
Ankle Replacement
28
30
32
35
37
40
7.4
Digits Replacement
23
24
25
27
28
29
4.7
Elbow Replacement
42
46
50
55
60
66
9.5
Hip Replacement
2,950
3,154
3,373
3,609
3,863
4,136
7.0
Knee Replacement
4,186
4,639
5,142
5,701
6,322
7,012
10.9
Shoulder Replacement
301
334
372
415
464
520
11.6
Wrist Replacement
24
25
27
28
30
31
6.6
Hip Resurfacing
146
157
168
180
193
207
7.2
Total
7,700
8,409
9,189
10,049
10,996
12,041
9.4
On the other hand, GlobalData presents a more optimistic outlook for growth in the various market
segments. The company forecasts that both the knee replacement and shoulder replacement segments
will grow at low double digit rates and the hip replacement segment will grow at a CAGR of 7.0 percent
through 2015. The forecast methodology of GlobalData is based on a combination of registry data that
is lagging behind actual data and company information. While the data for 2010 might be revised, the
underlying demographics remain intact. For hip resurfacing we estimate that the market will be negatively
affected by the recall of DePuys ASR hip system.
Figure 28 U.S. Orthopedic Reconstructive Joint Replacement Market Share 2010
38%
Hips
Shoulders
4%
Other
4%
Knees
54%
replacements is osteoarthritis, or degenerative joint disease, the wear and tear of joints. Currently, around
21 million Americans have osteoarthritis and this number is expected to increase to 30 million by 2020
as the average age of onset of this disease is 45. As the U.S. population ages, the number of cases of
osteoarthritis will increase. In 2008, surgeons performed approximately 581,000 total knee replacements,
285,000 total hip replacements, 309,000 partial hip replacements, 21,000 total shoulder replacements, and
19,000 partial shoulder replacements, and the number is expected to increase dramatically. By 2030, the
number of knee replacements is expected to increase more than six times to 3.5 million, and the number of
hip replacements will double to 573,000.44
The average (mean) cost of a knee replacement procedure is $50,000 and the average cost of a hip
replacement is $43,000.45 The average age of a knee or hip replacement patient is about 67.46 The average life
span of a hip replacement is 10-15 years whereas a knee re-placement can last up to 30 years.
38
Figure 29 Leading Competitors in the U.S. Joint Reconstruction Market in 2009

14.7% Other
10%
Smith &
Nephew
12%
Biomet
Zimmer
22%
J&J/DePuy 20.8%
20.5% Stryker
In the U.S., five companies dominate the joint

reconstruction implants market. Zimmer is the
leading company with a market share of 22 percent
followed by J&J/DePuy with 20.8 percent, Stryker
with 20.5 percent, Biomet with 12 percent, and
Smith & Nephew with 10 percent. Wright Medical
(not shown) is a distant sixth with 2.8 percent share.
Recent Developments in the U.S. Joint
Reconstruction Implants Market
The American Academy of Orthopedic Surgeons
(AAOS) and stakeholders from the orthopedic
community are creating a new national registry
to begin collecting information on hip and knee
replacements. While Kaiser Permanente, the
largest U.S. provider of hip and knee replacements
had established its own data collection and outcome
validation in 2001, there is no nationwide registry.
The American Joint Replacement Registry is being
created in order to facilitate quicker identification
of potential problems linked to the devices and
to reduce revision rates. After a pilot project, the
registry is due to become operational during the
summer of 2011 with the goal of achieving a 90%
capture rate. These data will then be used to bring
about changes that improve patient outcomes. If
the new registry reaches its coverage goal, it could
be bigger than all other registries combined. 47The
registry is expected to have similar effects for the

selection of treatment algorithm and the marketing
of devices as in Sweden, the UK, Canada or
Australia.
Spinal Implants
Low back and neck pain are the primary physical
conditions leading to spinal fusion procedures,
dynamic stabilization of the spine, motion
preservation discectomy, and vertebroplasty. Spinal
deformity and related conditions are the second
most important conditions leading to spinal surgery.
Finally, it is estimated that about 11,000 spinal
cord injuries (SCI) occur annually in the U.S. The
leading cause of SCI varies by age. Motor vehicle
crashes are the leading cause among persons under
age 65. Among persons age 65 and older, falls
cause most SCIs. Sports and recreation activities
cause an estimated 18 percent of SCI cases.48
In total, it is estimated that there are over 1.1
million spinal cord operations performed in the
U.S. each year, both to treat injuries and also to
correct degenerative conditions including post
injury conditions. Most common spinal procedures
involve fusion where unstable vertebrae are fused
together in order to stop painful motion.
Figure 30 U.S. Orthopedic Spinal Surgery Market, by Value (US$ millions)

Market Segment
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR)
Spinal Fusion
3,753
3,973
4,206
4,453
4,715
4,993
5.9
Pedicle Screw Systems
3,069
3,242
3,425
3,619
3,823
4,039
5.6
Interbody Cages
684
731
781
835
892
954
6.9
Spinal Non-fusion
416
458
526
592
665
748
12.5
Dynamic Stabilization
325
365
410
461
518
581
12.3
Artificial Disc Replacement
90
102
116
131
148
167
13.2
Total
4,169
4,441
4,732
5,045
5,381
5,741
6.6
39
In the spinal fusion market segment, the pedicle screw systems sub-segment accounted for just over $3.0
billion of market value in 2010 followed by interbody cages at $684 million. Fusion procedures make up
90% of the spinal devices market. In the spinal non-fusion market segment, the sub-segment dynamic
stabilization accounted for $325 million and artificial disc replacement $90 million. The spinal non-fusion
segment is expected to experience double digit annual growth from 2010 to 2015. Figure 30 shows the
value and projected growth rates for each of the sub-segments. Figure 31 shows the market share of each
of the sub-segments in 2010. Hospitals accounted for 94 percent of spinal surgery device sales in 2010.
The balance went to clinics (5%) and acute care centers (1%).
Figure 31 Estimated U.S. Spinal Product Market Share by Sub-segment in 2010
74%
Pedide Screw
Systems
Interbody Cages
16%
Artificial Disc
Replacement
2%
Dynamic
Stabilazation
8%
The spinal devices market is expected to grow at a rate of about 6.6% per year over the next several years.
Contrary to joint replacement, back problems primarily afflict a younger patient population. This might
be one of the reasons why the economic downturn has mostly affected the spinal implant market. Patients
age 65+ are covered by Medicare but only account for about a quarter of this market.
Figure 32 Leading Competitors in the U.S. Spinal Implants Market in 2009
3.1% Globus Medical

3.5% Zimmer
4.3% Orthofix Intl
Other
8%
Medtronic
35%
J&J/DePuy
17%
8.9% NuVasive
9%
Stryker
11.2% Synthes
The market shares of the leading companies in the

U.S. spinal implants market are considerably different
from the market shares in the joint reconstruction
market. There are eight leading competitors in the
spinal implants market. Medtronic is the dominant
player with a market share of 35.0 percent. During
2007, Medtronic acquired Kyphon, Inc, a leading
manufacturer of medical devices for minimally
invasive orthopedic applications to treat vertebral
compression fractures. The acquisition significantly
increased Medtronics market share in the spinal
implants segment. J&Js DePuy division is a distant
second with 17.0 percent market share followed by
Synthes with 11.2 percent, Stryker with 9.0 percent,
NuVasive 8.9 percent, Orthofix International 4.3
percent, Zimmer 3.5 percent, and Globus Medical 3.1
percent. Biomet (not shown) is a distant ninth with 1.8
percent. Contrary to joint replacement, many small
companies maintain a competitive position in a market
where consensus on treatment is not yet established.
Recent Developments in the

Spinal Implants Market
The spinal implants market appears to be
experiencing a slowdown in procedure growth
due to increased scrutiny by insurance companies
to pre-authorization requests for spinal fusion
procedures. Insurers consider these types of
procedures to be overused. Since spinal problems
can be complicated and hard to categorize,
insurers are asking more questions about whether
the procedures are appropriate, and if there may
be other alternative treatment options. Industry
analysts estimate spinal-market sales were flat in
the second half of 2010 compared with an 8%
increase in the second half of 2009. Companies
offering newer and less-invasive spinal devices and
procedures appear to be less affected.
40
Orthobiologics
Figure 33 U.S. Orthobiologics Market, by Value (US$ millions)
Market Segment
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR)
Bone Graft Substitutes
1,350
1,595
1,889
2,240
2,661
3,167
18.6
Viscosupplementation
725
814
913
1,024
1,148
1,288
12.1
DBM
275
300
327
357
390
425
9.1
Bone Growth Stimulators
215
232
251
271
293
317
8.1
Bone Allografts
165
179
194
210
227
246
8.3
Total
2,731
3,121
3,574
4,102
4,720
5,442
14.8
The Orthobiologics segment of the U.S orthopedic devices market had an estimated market value of $2.7
billion in 2010. It is the fastest growing segment of the orthopedics market and is forecast to grow at a
rate of 14.8 percent per year to $5.4 billion in 2015. The largest segment of the orthobiologics market is
bone graft substitutes. The segment had a value of $1.35 billion in 2010 and comprised 49 percent of the
market. It is forecast to grow at at very robust rate of 18.6 percent per year to $3.16 billion in 2015. The
viscosupplementation products segment had a value of $725 million in 2010 and is expected to grow to
$1.28 billion in 2015, a CAGR of 12.1 percent. A major increase is expected to come from Genzymes
Synvisc which now allows for a single injection treatment of hyaluronic acid. The DBM (demineralized
bone matrix) segment, the bone growth stimulators segment, and the bone allografts segment are also
expected to achieve a solid growth rate during the period. Figure 33 shows the value and projected growth
rates for each of the segments 2010-2015. Figure 34 shows the market share of each of the segments in
2010. Hospitals accounted for 90 percent of orthobiologic products sales in 2010. The balance went to
clinics (7%), long term care facilities (2%), and acute care centers (1%).
Figure 34 U.S. Orthobiologics Market Share by Segment in 2010
49%
BoneGraft
Substitutes
BoneAllografts
%6
BoneGrowth
Stimulators
8%
DBM
10%
27%
Viscosupplementation
The market shares of the leading companies in the U.S. orthobiologics market are considerably different
from the market shares of all the other orthopedic market segments. The market is highly fragmented and
has numerous competitors with a market share of less than 2%. This group of small competitors comprises
over 40% of the market. Medtronic is by far the market leader with a market share of 22.3%. Genzyme
(who only competes in the viscosupplementation segment) and DePuy are a distant second and third with a
market share of 9.5% and 8.0%, respectively.
41
Figure 35 Leading Competitors in the U.S. Orthbiologics Market in 2009
2.5% Stryker
Others 40.9%
2.5% Allosource
Medtronic 22.3%
2.7% Orthofix Intl

2.9% Orthovita
3.2% Osteotech
5.5% Synthes
8.0% DePuy
9.5% Genzyme
Trauma Fixation
Figure 36 U.S. Orthopedic Trauma Fixation Market, by Value (US$ millions)
Market Segment
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR)
External Fixators
238
247
256
265
275
285
3.7
Internal Fixators
1,976
2,091
2,214
2,344
2,483
2,631
5.9
IM Nails
700
731
764
798
834
872
4.5
IM Plates
690
746
805
870
939
1,014
8.0
IM Screws
586
614
645
677
710
745
4.9
Total
2,213
2,338
2,469
2,609
2,758
2,916
5.7
The trauma fixation segment is the fourth largest segment of the U.S. orthopedic devices market. The
segment had a market value of $2.2 billion in 2010 and is forecast to grow at a rate of 5.7 percent per year
to $2.9 billion in 2015. Compared to the other segments, fixation seems to be the most stable segment
of orthopedics and most companies showed very good growth rates. Within the trauma fixation market,
the largest segment is internal fixation devices which comprise almost 90 percent of the market. The
internal fixation segment includes the sub-segments intra-medullary (IM) nails, plates and screws. Hospitals
accounted for 70 percent of trauma fixation products sales in 2010. The balance went to acute care centers
(20%) and clinics (10%). On average, every person in the U.S. will experience two broken bones over the
course of a lifetime.
Figure 37 Leading Competitors in the U.S. Trauma Fixation Devices Market in 2009
12%
Others
3%
Biomet
Synthes 48.5%
4.5% Zimmer
6.5% J&J/DePuy
7.5% S&N
18%
Stryker
The market shares of the leading companies in the U.S. trauma fixation devices market are considerably
different from the market shares in both the joint reconstruction market and the spinal implants market.
There are six leading competitors in the fixation devices market. Synthes is by far the dominant player
with a market share of 48.5 percent. Stryker holds a distant second position with 18 percent market share
followed by Smith & Nephew with 7.5 percent, J&J/Depuy 6.5 percent, Zimmer 4.5 percent, and Biomet 3
percent. All other companies make up the remaining 12 percent.
42
Hospital Orthopedics
A 2010 survey by Merritt, Hawkins & Associates found that orthopedic doctors each generate an average
of $2.12 million annually of inpatient and outpatient revenue for a hospital. This represents an 8 percent
decrease in revenue compared with a similar survey in 2007 and a 29 percent decrease from a high of $2.99
million in 2004. In 2004, revenue generated by orthopedic doctors ranked number one among 17 specialties,
but its ranking dropped to number two in 2007 and number 3 in 2010.49 Even though orthopedics has
historically been among a hospitals most lucrative services, it is expected that emerging technologies and
competition will continue to pose a challenge for hospitals to maintain this lucrative business. Advances in
medical techniques and devices have begun pushing many procedures to outpatient settings, reducing the
need for hospital orthopedics. In addition, increasing device costs and stagnant reimbursements are making
many procedures less profitable.
Orthopedic Device Manufacturers Budget Allocation
Figure 38 Budgetary Allocation of Orthopedic Device Companies (in percent)
20%
6%
Net Income
Margin
Cost of Goods
Sold
28%
Taxes, Net
Interest
Expense &
Other
R&D
6%
Sales, Mktg.,
General &
Admin
40%
Source: Averaged data from the 2008 annual reports of leading orthopedic device manufacturers
There are two important characteristics which

drive the orthopedic device market: (1) a close
relationship between surgeons and orthopedic
device manufacturers; and (2) a large amount
of research and development investment. The
relationship between orthopedic doctors and
orthopedic companies is highly interactive and
includes sales discussions, and also research and
design issues. Since there are only a few large
suppliers of orthopedic devices, the competition is
fierce to gain access and loyalty from the orthopedic
surgeon. In the orthopedics field, companies
allocate about 40 percent of their budgets to
market and sell products to doctors, compared to
27 percent in the hospital supplies market. It is
this relationship that helps drive the acceptance of
new technologies. Likewise, new technologies are
an important driver of the industry with 6 percent
of budgets going back into product development.
However, this is somewhat less than the amount
of R&D spending in other medical fields. In the
field of orthopedics, new technologies are looked at
favorably by doctors and they are not price sensitive.
Top 20 Hospital Orthopedic Centers
(Source: USNews.com:
Best Hospitals 2011)
1. Hospital for Special Surgery (New York, NY)
4. Cleveland Clinic (Cleveland, OH)

5. Johns Hopkins Hospital (Baltimore, MD)
6. Duke University Medical Center (Durham, NC)
7. Barnes-Jewish Hospital/Washington University
(St. Louis, MO)
8. UMPC-University of Pittsburgh Medical Center
(Pittsburgh, PA)
9. University of Iowa Hospitals and Clinics
(Iowa City, IA)
10. Rush University Medical Center (Chicago, IL)
11. NYU Hospital for Joint Diseases
(New York, NY)
12. Harborview Medical Center (Seattle, WA)
13. Thomas Jefferson University Hospital
(Philadelphia, PA)
14. Hospital of the University of Pennsylvania
(Philadelphia, PA)
15. New York-Presbyterian University Hospital of
Columbia and Cornell (New York, NY)
2. Mayo Clinic (Rochester, MN)

3. Massachusetts General Hospital (Boston, MA)
16. University of Washington Medical Center

(Seattle, WA)
43
17. Stanford Hospital & Clinics (Palo Alto, CA)

18. University of California, San Francisco Medical
Center (San Francisco, CA)
19. Ronald Reagan UCLA Medical Center (Los
Angeles, CA)
20. Brigham and Women's Hospital (Boston, MA)
6.2. MAJOR COMPETITORS IN THE
ORTHOPEDIC DEVICES MARKET
Arthrex Inc. A privately held company was
incorporated in 1984 and has its headquarters in
Naples, Florida. Arthrex is the global market leader
in the fast growing arthroscopy/soft tissue repair
market. In 2010, global sales of the company are
estimated to have reached about $850 million.
www.arthrex.com
ArthroCare was founded in 1999 and is a multi
business medical device company. The company
is headquartered in Austin, TX and reported 2010
group sales of $355 million. ArthroCare attributed
the decline in the sports medicine segment mainly
to the slowdown in sports medicine procedures in
the United States. www.arthrocare.com
Biomet, Inc. was incorporated in 1977, and
has its headquarters in Warsaw, Indiana. The
company offers a wide product portfolio in all
areas of orthopedic surgery and other fields. In the
fiscal year 2010, ending on May 31st, Biomet had
worldwide net sales of $2.698 billion, an increase
of 8% compared to 2009. Reconstructive sales
grew 11% in the United States. For the six month
period ending November 30, 2010 this growth rate
declined to 3%. www.biomet.com
ConMed Linvatec with headquarters in
Largo, Florida, is a global company in arthroscopy
and orthopedic powered instruments. ConMed
Corporation reported 2010 sales of $714 million
compared to $695 million in 2009. ConMed
Linvatec accounts for approximately 60% of the
sales of the corporation. www.conmed.com
DePuy Orthopedics is headquartered in
Warsaw, Indiana, and was founded in 1895 giving it
the distinction of being the oldest manufacturer of
orthopedic implants in the U.S. DePuy is credited
as an innovator in the development of the total
hip replacement procedure, a major contribution
to what the orthopedic market has become today.
DePuy is a subsidiary of Johnson and Johnson. In
2010, the DePuy division had net sales of $5.585
billion which represented a 3% increase over 2009.
Growth in the U.S. only reached 2%.
www.depuy.com
DJO Global was established in 1978 and over
time became a provider of orthopedic devices,
products for rehabilitation, pain management, and
physical therapy. In 2010, the company reported

sales of $966 million compared with net sales of
$946 million in 2009. DJO Global is headquartered
in San Diego, CA. www.djoglobal.com
Exatech is an orthopedic company established
in 1985 which has experienced an extraordinary
growth rate over the last decade. In 2010, the
company reported sales of $190.5 million, an
increase of 8% compared to 2009. Exatech is
headquartered in Gainesville, FL.
www.exac.com
Genzyme is a biotechnology company that was
established in 1981 and pioneered the culture of
chondrocytes in orthopedics. Carticel is indicated
for the repair of articular cartilage in the knee.
Synvisc is a gel for an intra-articular injection
of a hyaluronic acid for the treatment of pain in
osteoarthritis of the knee (viscosupplementation).
In 2010, Genzyme reported sales of $393 million
for Synvisc, an increase of 20% over 2009.
Sales of Carticel seem to have remained flat at
approximately $45 million. Genzyme was acquired
by Sanofi-Aventis in February 2011.
www.genzyme.com
Globus Medical is a privately held spinal
company based in Audubon, PA. The company
was founded in 2003 and has developed a
comprehensive portfolio of surgical solutions,
especially in posterior motion preservation. Sales in
2010 are estimated to have exceeded $250 million.
In January 2011, Globus Medical acquired Facet
Solutions, a specialist for facet replacement systems.
www.globusmedical.com
Integra LifeSciences was founded in 1989
and is headquartered in Plainsboro, NJ. Integra
orthopedic products include implants for spinal
surgery, foot and ankle repair, hand and wrist
surgery and tendon repair. In 2009, the company
reported sales of $683 million. In the third quarter
of 2010, the company reported sales of $186.6
million, an increase of 8.3% over the third quarter
of 2009. Thirty-eight percent of sales result from
orthopedic products. www.integralife.com
Medtronic is one of the largest medical
technology companies in the world. The companys
Medtronic Spine division is the global leader
for spinal implants and instrumentation and is
headquartered in Memphis, TN. In the fiscal year
2010, ending on April 30th, the spinal division
increased its sales by to 2.9% to $3.5 billion out
of Medtronics total $15.8 billion in sales. ($868
million were realized with orthobiologics). For the
six month period, ending on October 31st, sales
of the spinal division declined by 5.5%, mostly
due to pricing pressure and a declining number of
total disc arthroplasty procedures. In August 2010,
Medtronic acquired Osteotech a provider of human
bone and connective tissue.
www.medtronic.com
44
MTF Musculoskeletal Transplant

Foundation is the largest tissue bank in the
United States. MTF is a non-profit organization
that provides allograft tissue for various orthopedic
indications. www.mtf.org
NuVasive is a rapidly growing medical device
company focusing on the spinal fusion market. For
2010, the company expects to announce sales of
$478 million, an increase of almost 30% compared
to 2009. NuVasive explains this extraordinary
growth with the success of its lateral approach to
spinal fusion procedure. The company is based in
San Diego, CA. www.nuvasive.com
Orthofix was established in 1980 and is a leader
in external fixation and bone growth stimulation
products. In 2010, the company reported sales
of $564 million. In its core segments spine and
fixation, Orthofix reported growth rates of 10%
compared to 2009. The corporate headquarters
of this former Italian company are located in the
Netherlands Antilles. The companys U.S. sales and
manufacturing operations are located in Lewisville,
Texas. www.orthofix.com
Smith and Nephew is the 4th largest company
in orthopedics and the UKs largest Medtech
Company. The company is organized into three
global business units: (1) orthopedics, (2) endoscopy,
and (3) advanced wound management. Global
orthopedics sales in 2010 increased by 2% to $2.2
billion. Due to the acquisition of Richards, S&N
maintains a significant development, manufacturing
and sales operation in Warsaw, Indiana.
www.smith-nephew.com
Stryker Orthopedics Headquartered in
Kalamazoo, Michigan, Stryker Corporation is
one of the world's leading medical technology
companies with a broad range of products in
orthopedics and a significant presence in other
medical specialties. The company reported global
sales of $7.32 billion in 2010. Orthopedic implant
sales in the U.S. grew by 5%. While U.S. sales of
spinal implants declined by 1%, trauma implants
grew 11%, knee implants 6% and hip implants 5%.
www.stryker.com
Symmetry Medical is the largest independent
supplier of devices and instrumentation to
the orthopedic device industry. The company
anticipates 2010 sales to have reached $361 million
compared to $366 million in 2009. As a supplier to
the industry that was reducing net working capital,
the company already suffered a decline in sales in
2009. www.symmetrymedical.com
Synthes Inc. headquartered in West Chester, PA
is the world market leader in fracture management.
For 2010, the company reported net sales of $3.687
billion. Net sales in the United States increased by
4.6% to $2.154 billion. While U.S. sales in fracture
management and power tools increased by 10%,
sales of spinal products remained under pressure.

With the acquisition of Anspach in November
2010, Synthes increased its position in the attractive
power tool market. www.synthes.com
Wright Medical Group Inc. Headquartered in
Arlington, Tennessee, WMG designs, manufactures,
and markets orthopedic devices and orthobiologics.
In 2010, Wright Medical reported net sales of $519
million, an increase of 6.4%. The U.S. market grew
by 3.5% with a decline of 3% in hip implants and
an increase of 2% in knee implants. The company
has a relevant market position in the extremities
segment which showed an increase of 14% in 2010.
www.wmt.com
Zimmer Holdings is based in Warsaw, Indiana,
and is the global market leader in joint replacement.
For 2010, the company reported global sales of
$4.22 billion. This represents an increase of
3% compared to the prior year. In the U.S., the
reconstructive segment grew by 2% to $1.816
billion while the larger knee implant business only
grew 1%, hip implants increased by 4%, and the
sales of spinal implants declined by 8%.
www.zimmer.com
Recent Market Developments:
Declining growth rates, pending healthcare reform
and the changing regulatory and reimbursement
environment are putting pressure on the orthopedic
industry. The equity valuation of the sector remains
relatively flat despite solid, patent-protected revenue
streams. Rumors of a further consolidation of
the industry periodically flare up, but 2010 saw no
major transactions. Smith & Nephew, a presumed
takeover target, clearly stated that the company is
not engaged in any discussion which could lead to a
merger or a takeover.
Some industry leaders such as Synthes, Stryker and
Medtronic acquired small targets that fit within their
existing business, or added an attractive niche market
to their portfolio. A number of smaller companies
merged or made minor acquisitions. Also, venture
capital companies that in the past were attracted
by good margins and attractive fundamentals of
orthopedics seemed more reluctant to fund new
ventures. Small companies with a convincing
business model still were able to raise funds for
expansion or development of new technologies.
Examples include BioMimetic Therapeutics
(www.biomimetics.com), Amedica (www.
amedicacorp.com), Applied Spine Technologies
(www.appliedspine.com), Baxano (www.baxano.
com), Carticept Medical (www.carticept.com),
Dfine (www.dfineinc.com) and others. This funding
indicates that the interest in orthopedics, especially in
spine and orthobiologics still exists, albeit at a lower
level than before the recession. On the other side,
ReGen Biologics had to stop its operation after the
FDA rescinded the 510(k) approval of the companys
collagen meniscus implant.
45
The reservation towards the orthopedic industry

was also felt by Tornier (www.tornier.com) who
in February 2011 could only place its shares on
the Nasdaq exchange at the very low end of its
expectation. Tornier, formerly a French orthopedic
company, has leading market shares in the shoulder
implant market.
6.3. EMERGING TECHNOLOGIES
The orthopedic industrys advantages are short, less
expensive innovation and commercialization cycles,
close contact to its customers, and a straightforward
regulatory and reimbursement pathway have come
under pressure. Government and private payers
are becoming more stringent on reimbursement
and clinical trials are becoming more common for
approval of new devices.
Despite these trends, the orthopedic companies
continue their endless cycle of incremental
innovation and most of them focus on improved
functional outcome, implant durability, and reduced
hospital cost. An analysis of the list of orthopedic
products cleared by the FDA under the 510(k)
application process shows a slight decline in the
total number of approved products, but there
are still 30 40 orthopedic products cleared each
month.50 Significant also is the decline of premarket
approval application (PMA) approvals between
1999 and 2009. A recent Stanford University study
negatively compared the medical device approval
process in the U.S. to the process in Europe, both in
terms of cost and timelines51.In fact, DePuy was the
only orthopedic device company in 2010 to receive
an approval from the FDA for the PMA of its all
ceramic hip articulation, notably a system that was
marketed outside the United States since 2004.
While an inefficient, costly and unpredictable
regulatory pathway clearly limits innovation, the
acceptance of emerging technologies in orthopedics
is also challenged by the relatively successful
outcome of todays procedures and the inertia of
institutional decision making.
In January 2011, the Center for Devices and
Radiological Health released its Medical Device
Technology Forecast which was based on a survey
of its own technical mangers and 15 non-FDA
experts.52 For orthopedics, minimally invasive
implants and instrumentation targeted at reducing
lengthy recoveries or surgical trauma are identified
as a continued major trend, coupled with the
development of imaging. Even if the first and
second generation of robotics or surgical navigation
were not a success the trend towards robotic surgery
and robotic prosthesis is perceived to be intact, not
least due to significant military initiatives. The
RFID (radio-frequency identification) technology for
devices is expected to advance and to become widely
used. The participants of the survey also indicated
confidence in advances for tissue-engineered products
and device-drug-biological products.
In total joint implantology, few emerging

technologies seem likely to be successfully
introduced within the next few years. Most
companies offer a complete portfolio of designs,
implant surfaces and state of the art articulation
couplings for all patient segments. The approaches
of differentiating patient segments by marketing
approaches, for instance in total knee arthroplasty,
or by small technological differences seem to have
come to an end. The same seems to be the case for
the renaissance of resurfacing which had another
setback in the United States with the recall of
DePuys ASR.
Improved wear resistance remains a problem in
total joint arthroplasty, and improved UHMWPE or
other polymeric bearing surfaces as polycarbonateurethane (PCU) continue to be developed. (www.
dsm.com) PCU adds another element to the debate
because it has the same elasticity and hardness as
cartilage, and has a better affinity to water. Being
closer to the articular functioning of the healthy
joint, this new material could offer a better outcome
than the existing articulations. The same might
eventually be true for direct metal laser sintered
devices (www.eos.info) that cannot only fulfill the old
dream of customized implants but also mimic the
diverse biomechanical properties of healthy bone.
Whether or not these technologies will eventually
become disruptive innovations in joint arthroplasty
remains to be seen. Closer to the market are
enhanced articulation pairings such as oxidized
zirconium or highly cross-linked PE.
Fracture care. An unsolved clinical problem is
implant-induced infection that obviously is the
highest in fracture treatment but also continues
to be an issue in knee and hip arthroplasty. Antiinflammatory or antibiotic drug release coatings
based on various techniques are an emerging
technology that will finally avoid this painful and
costly condition. Developing specific products for the
growing group of very old people being affected by
fragility fractures is another trend in trauma fixation
In spinal surgery, cervical disc arthroplasty by
itself is not an emerging technology, but now seems
to be accepted as equal or superior to arthrodesis53.
After the mixed results of lumbar disc arthroplasty
and the controversy around reimbursement for
disc arthroplasty or dynamic stabilization systems,
these clinical results at least support the outlook
for further development. Less invasive and motion
preserving devices are marketed or developed by all
nine major spine companies and also many small
companies. Swiss inventors were awarded the
best motion preservation technology of 2010 for
Elaspine, a pedicle screw based posterior motion
preservation system with an elastic polymer rod.
www.spinelab.com/en/product_awards.htm
46
The challenging economic environment of the spine

market, however, seems to have shifted the attention
of developers back to improving standard of care
or solving actual clinical problems. Lumbar spine
fusion therefore is moving back into focus as state of
the art therapy, and improved access technologies
or materials to promote fusion of the vertebrae
continue to be investigated.
In Orthobiologics, the controversy around the
use of BMP products in the cervical spine has
benefited traditional, non-impregnated bone
grafts. Due to their ease-of-use and ready
availability, use of synthetic bone graft substitutes
has increased commercial and developmental
interest. These substitutes which are available in
many forms and porosities are also the scaffold for
the orthobiologicals application. While Stryker
sold its interest in its BMP-7 products in February
2011 and discontinued its research, Medtronic
seems to continue its, so far successful, investment
after a positive vote of the FDA advisory panel on
a new BMP-2 matrix in July 2010. (Medtronics
AMPLIFY wwwp.medtronic.com). DePuy Spine
continues to study the effectiveness of a recombinant
version of the human growth factor GDF-5 in
patients with early lumbar disc degeneration. (www.
clinicaltrials.gov) While disc regeneration, as an
increase in disc height or hydration, is a promising
potential market, actual products are not expected
before the middle of this decade
For cartilage injuries, no treatment option has
established itself or is of sizable economic relevance
for the industry. However, the regeneration of
articular cartilage is an unmet surgical need.
Modifications of existing cartilage repair therapies
therefore continue to be investigated. While
Genzyme has completed its Carticel studies, smaller
companies such as Histogenics, ProChon, Kensey
Nash, etc. are sponsoring autologous chondrocytes
tissue implant studies based on the microfracture
procedure. (www.clinicaltrials.gov) While Kensey
Nash and others have received CE marks for their

products; the marketing in the United States still is
years away.
Key Points for Swiss Companies
Despite many challenges, the orthopedic market
remains attractive for Swiss companies. As
competition in the market is highly concentrated,
any market entry must be carefully analyzed. In
joint reconstruction, five companies cover 90% of
the market. All of them need technology to lower
cost or to differentiate their product offering within
the acceptable regulatory and reimbursement
framework. The many Swiss suppliers with
capabilities in joint reconstruction manufacturing or
development will need to address the big five market
leaders.
The market in spinal implants is more fragmented
and far less mature. In 2010, the smaller
companies seem to have gained market share.
New technologies developed in Switzerland might
therefore be interesting for all players in this still
attractive segment.
Despite the dominant market share of Synthes
many companies still develop niches in the
trauma market. Unlike joint reconstruction,
orthobiologics and spine, development times in
fracture management are short. Products typically
follow the 510(k) approval process. As in the other
segments of orthopedics, sales and distribution in
the United States are complex and costly.
In orthobiologics, the market finally seems more
open. Except for bone substitutes, the FDA has
made it clear that new approaches will not find
approval without multistage clinical studies.
In orthobiologics, medical technology and
biotechnology are converging. Any approach to this
market in the United States will require adequate
funding and complex PMA filings.
7. Diagnostics
This chapter will focus primarily on the U.S. in vitro diagnostic (IVD) testing market. It covers the
traditional IVD segments (clinical chemistry, immuno chemistry, hematology, etc.) as well as the growing
molecular diagnostic testing market. It will, in particular, highlight the influence that technological
developments in molecular diagnostics are having on the direction of the pharmaceutical and diagnostics
industries. Additional information about the molecular diagnostics and imaging market can also be found
in the following chapter on Imaging.
IVD testing analyzes samples (i.e., blood, urine, tissue, etc.) outside the body in a controlled environment.
IVD medical devices include reagents, reagent products, calibrators, control materials, kits, instruments,
apparatus, equipment, or systems. The devices are used primarily for the purpose of providing information
about (1) a physiological or pathological state, (2) a congenital abnormality, (3) the safety and compatibility
with potential recipients, or (4) to monitor therapeutic measures.54 The IVD market includes tests conducted
in central laboratories as well as tests for near patient point-of-care testing.
47
Figure 39 U.S. In Vitro Diagnostic Testing Equipment & Supplies Market, by Product Type,
2010-2015 (US$ Billions)
Item
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR %)
Reagents & Consumables
15,752
16,611
17,520
18,478
19,492
20,563
5.5
Instruments & Systems
2,929
3,090
3,258
3,439
3,629
3,830
5.5
Total
18,681
19,701
20,778
21,917
23,121
24,393
5.5
According to GlobalData, the worldwide IVD market was valued at approximately $42.5 billion in 2010.
From that amount, the U.S. accounted about 44% of the world market with $18.6 billion in sales making
it the worlds largest single market for diagnostic testing equipment and supplies. The U.S. IVD market
is expected to grow at a rate of about 5.5 percent per year through 2015 to an estimated market value of
$24.4 billion. Reagents and consumables accounted for 84% of product sales while sales of instruments
and systems comprised the remaining 16% in 2010.
Figure 40 U.S. In Vitro Diagnostics Testing Equipment & Supplies Market,

by Market Segment, 2010-2015 (US$ Billions)
Market Segment
2010
2011
2012
2013
2014
2015
2010-2015
(CAGR)
Immuno Chemistry
6,963
7,360
7,780
8,225
8,696
9,195
5.7
Clinical Chemistry
4,012
4,222
4,443
4,675
4,920
5,177
5.2
Hematology
2,882
3,022
3,170
3,326
3,489
3,662
4.9
Infectious Immunology
2,102
2,228
2,361
2,502
2,651
2,810
6.0
Microbiology Culture
1,443
1,515
1,590
1,669
1,753
1,841
5.0
Genetic Testing
714
760
808
859
914
972
6.4
Histology & Cytology
563
594
627
662
698
737
5.5
Total
18,681
19,701
20,778
21,917
23,121
24,393
5.5
The U.S. IVD market can be divided into seven primary market segments. Immuno chemistry, the largest
segment with estimated sales revenue of $6.96 billion in 2010 is forecast to grow 5.7% per year to a market
value of just under $9.2 billion in 2015. The clinical chemistry segment is second in market size with
estimated sales of just over $4.0 billion in 2010 and is forecast to grow at a rate of 5.2% through 2015.
The third largest segment, hematology, had estimated sales of $2.88 billion in 2010 and is forecast to grow
to $3.66 billion in 2015. The nascent genetic testing segment is expected to experience the fastest growth,
increasing at a rate of about 6.4% per year from $714 million in 2010 to $972 million in 2015.
Figure 41 U.S. In Vitro Diagnostics Testing Equipment & Supplies Market, by Customer Group, 2010
1.9% Other
Hospitals 59.2%
1.6% Clinics
1.7% Drug Stores
2.0% AcuteCare
Centers
33.7% Laboratories
48
The U.S. IVD market can be divided into five primary customer groups. The two largest purchasers of
IVD products are hospitals which purchase about 59.2% of the equipment and supplies and independent
laboratories which purchase about 33.7%. Distribution varies by segment; within the immuno chemistry
segment for example, hospitals purchased 55% of the equipment and supplies, while labs purchased
45%. However, in the clinical chemistry segment, hospitals and labs each accounted for about 45% of the
distribution while clinics purchased 6% and acute care centers 4%. The distribution split in other market
segments varies as well. Freedonia Group forecasts the hospital segment will grow at a rate of about 4.6%
per year through 2013 while the independent lab segment will grow at bit faster at a rate of 5.3% per year.
Figure 42 The U.S. Self-testing Clinical Chemistry Products Market, by Product Type,
2008-2013 ($ Billions)
Item
2008
2009
2010
2011
2012
2013
2008-2013
(CAGR)
Reagents & Test Kits
2,235
2,425
2,631
2,854
3,097
3,360
8.5%
Blood Glucose
1,975
2,147
2,333
2,536
2,756
2,995
8.7%
Other
260
278
298
319
341
365
7.0%
Instruments & Systems
385
401
417
434
452
470
4.1%
Total
2,620
2,827
3,050
3,290
3,550
3,830
7.9%
Source: Based on Freedonia Group, In-Vitro Diagnostics in the U.S. to 2013, March 1, 2009
Technological advances in the IVD market have

brought forth an increase in point-of-care (POC)
testing that is as accurate as testing performed
in central laboratories. As such, an increasing
number of tests are being performed at patients
bedsides in hospitals, emergency rooms, intensive
care units, outpatient clinics, and physicians
offices. In addition, numerous POC tests are
available to consumers in the over-the-counter
(OTC) self-test market. The self-test market has
been growing rapidly as a result of increased
adoption of self-testing by the public. The selftest market is dominated by blood glucose testing,
but also includes tests for pregnancy, coagulation,
fecal occult blood, drugs of abuse, HbA1c, HIV,
cholesterol, and others. The increasing incidence
of Type II diabetes will continue to drive growth
in the blood glucose self-test segment. In 2008,
the U.S. self-test market for blood glucose reagents
and test kits was estimated at $1.975 billion and is
forecast to grow 8.7% per year to $2.995 billion in
2013. Roche, LifeScan (J&J), Siemens Healthcare
Diagnostics, and Abbott are the clear leaders for
blood glucose testing products, and account for
almost 75% of the entire market. Pregnancy testing
and coagulation monitoring are two other self-test
areas that are growing rapidly. Growth in the selftest products market has also been helped by the
expansion of reimbursement eligibility for more
types of self-test products.
Molecular Diagnostics (MDx)
As clinicians make healthcare decisions diagnostics
tests have a major influence. While diagnostics tests
represent a tiny percentage of medical expenditures
they generally influence 60-70% of all treatment
decisions. With the advent of molecular diagnostics
there is a growing focus on diagnostics for early
detection of diseases.
Molecular diagnostics, the analysis of DNA and

RNA at the molecular level, is a small part of the
IVD market. It is, however, the fastest growing
segment of the IVD market, driven by the growing
understanding of the human genome, and the
desire to identify viruses and infectious diseases
more accurately at an earlier stage than currently
possible. It has also emerged as a favorite area
for venture investment as diagnostics businesses
generally fetch higher returns on investment than
pharmaceutical and other biotech businesses.
The major factors that are predicted to drive growth
in this industry include the increasing incidences of
various chronic diseases, increasing number of cases
of hepatitis B and tuberculosis and the availability
of various molecular diagnostics tests.
Molecular diagnostic testing analyzes samples for
specific states of health, disease, or predisposition
to disease. A broad variety of technologies and
platforms have been developed recently and include
Non-amplified Probe-based Assays, Cytogenetics
and Fluorescent In Situ Hybridization (FISH),
Polymerase Chain Reaction (PCR), Microarrays
and other multiplex technologies, DNA methylation
assays and numerous others.
The current demand for molecular diagnostic and
gene detection products is still small relative to the
large number of tests performed in the traditional
IVD market. However, a growing number of
companies are investing heavily in molecular
diagnostics and gene detection systems in order to
capitalize on this fast growing market. In 2010,
more than 500 companies have been identified
worldwide to be involved in developing molecular
diagnostics compared with less than 100 in 1995.55
The majority of these companies are in the U.S.
where most of the development has taken place.
49
The development of molecular tests as companion

tests for the development of pharmaceutical
products is a growing area of molecular diagnostics.
Companion diagnostic tests are becoming an
important tool in drug discovery, preclinical drug
development, and patient monitoring during clinical
trials. By using companion tests, pharmaceutical
companies are able to complete clinical trials
quicker and with more confidence. In the past,
a drug that may have been highly effective for a
very specific segment of the population may not
have made it out of a randomized clinical trial
that included both responders and non-responders
because the drug had difficulty performing better
than the placebo. However, with better diagnostic
and screening tests, pharmaceutical companies are
able to complete clinical trials with greater certainty
and increase their prospects for growth.
DNA sequencing, a sub-segment of the molecular
diagnostics sector, is currently used mostly in
research with emerging applications in drug
discovery and molecular diagnostics, and is one of
the most promising contributors to growth in the
molecular diagnostic sector. In 2009, the value of
the U.S. DNA sequencing market including reagents
and instruments was valued at $500 million and
is projected to rise to about $640 million in 2014.
The U.S. DNA sequencing market comprises about
70% of the global DNA sequencing market.56
The cost of DNA sequencing is still relatively high;
however, efforts are being made to reduce the cost
of sequencing ones genome to $1,000, and industry
experts believe this will happen in the near future.
Opportunities exist for companies that can produce
simple-to-operate, portable, and affordable small
sequencers that can be integrated into point-ofcare diagnostics, as well as used for research in
smaller laboratories. It is estimated there are over
300,000 scientists working in smaller peripheral

laboratories worldwide, and as a result, there is a
market potential for at least 50,000 small sequencers
over the next five years.57 Since the U.S. comprises
about 70% of the global DNA sequencing market,
that equates to a market of at least 35,000 units in
the U.S.
In the laboratory area, there has been significant
advancements in the development of fully
automated molecular diagnostic testing capabilities.
These multiplex tests provide more information
about each sample by testing for multiple organisms
in infectious disease (i.e., instead of testing for
only one target such as HIV); and faster results
for personalized care. As a result, these tests are
of greater clinical value for analyzing multiple
targets that may explain patient symptoms. Fully
automated MDx means that one instrument
integrates sample preparation, amplification,
detection and presentation of results. Sample
preparation usually requires DNA and/or RNA
extraction. These fully automated systems can be
large or small. Large systems can run large batches
of samples and focus on throughput and cost
efficiency as well as reduced labor, ease of use and
objective result presentation. Leading companies
include Gen-Probe, Becton Dickinson, Siemens,
and Roche. Smaller systems are emerging and offer
faster turnaround times, a smaller footprint, and can
be deployed closer to patients. Leading companies
include Autogenomics, Becton Dickinson, Canon
US Life Sciences, Cepheid, Idaho Technology, and
Roche. Automated nucleic acid testing is nearing
the point of care, although no system has yet been
waived by CMS under the regulations that cover all
laboratory testing, known as the Clinical Laboratory
Improvement Amendments (CLIA) and several are
yet to be evaluated by the FDA.58
Figure 43 Projected Molecular Diagnostic Test Sales in North America by Application Segment,
2008-2012 ($ Millions)
Item
2008
2009
2010
2011
2012
2008-2012
(CAGR %)
Infectious Diseases
1,084
1,226
1,387
1,570
1,776
13.1
Blood Screening
578
597
618
638
660
3.4
Histology
307
337
371
408
448
10.0
Oncology
98
112
127
145
165
13.9
Prenatal
90
95
100
105
110
5.0
Coagulation
78
82
86
91
96
5.3
Tissue Typing
37
41
45
50
55
10.1
Inherited Diseases
21.7
Pharmacogenomics
37
48
64
84
110
31.5
Total
2,322
2,559
2,821
3,110
3,428
10.2
Source: Data extrapolated by Swiss Business Hub USA by cross referencing two data tables from
The World Market for Molecular Diagnostics, Kalorama Information, January 1, 2009
50
Extrapolated data from Kalorama Information show the overall North American molecular diagnostic
tests market had an estimated value of $2.3 billion in 2008, and that the market will grow at a rate of
about 10.2% per year to a value of $3.4 billion in 2012. The first molecular diagnostics applications
were in the infectious diseases areas and this is currently the largest segment of the market. The segment
has been dominated by tests for sexually transmitted diseases and hepatitis. The market value of the
infectious disease tests segment was estimated at just over $1.0 billion in 2008 and is expected to grow to
over $1.7 billion in 2012. This represents a strong 13.4% compound annual growth rate over the 4-year
period. The blood screening segment is the second largest segment, and is expected to grow from $578
million in 2008 to $660 million in 2012, however at a much slower annual rate. Molecular test sales in the
pharmacogenomics segment are expected to experience explosive growth, increasing over 31% per year
during the 4-year period. This newly emerging area of molecular diagnostics is bringing together the fields
of pharmaceuticals and diagnostics, and advancing the field of personalized medicine by enabling drug
manufacturers to optimize drug therapies and minimize adverse effects by more closely matching drugs and
drug combinations to each patients unique genetic makeup.
An overview of a comprehensive report about the molecular diagnostics market titled Molecular
Diagnostics: A Dynamic and Rapidly Broadening Market can be found at the following Website:
www.healthtech.com/uploadedFiles/Reports/Reports/Molecular_Diagnostics/Molecular_Diagnostics_
brochure.pdf
The Age of Personalized Medicine is a source that can provide information about policy issues, reports and
publications, and events related to the advances in personalized medicine.
www.ageofpersonalizedmedicine.org/center/
The FDA provides various lists of the IVD and molecular tests that have been approved for use in the U.S.
and the companies that received the approval.
A complete list of FDA approved tests of Donor Screening Assays for Infectious Agents and HIV
Diagnostic Assays can be found at the following Website:
www.fda.gov/BiologicsBloodVaccines/BloodBloodProducts/ApprovedProducts/LicensedProductsBLAs/
BloodDonorScreening/InfectiousDisease/UCM080466
Alphabetical List of FDA Licensed Products:
www.fda.gov/downloads/BiologicsBloodVaccines/UCM149970.pdf
Complete List of FDA Licensed Products and Establishments (by product or by company)
www.fda.gov/BiologicsBloodVaccines/ucm133672.htm
7.2. MAJOR COMPETITORS
The top seven in vitro diagnostics (IVD) equipment
and supplies manufacturers in the U.S. represented
about 41% of overall industry sales in 2009. The
market shares of the major competitors vary by
the specific market segment (i.e., clinical chemistry,
hematology, immuno chemistry, etc.), and not all
the companies compete in every market segment.
In the U.S., the clinical chemistry segment is a
somewhat concentrated market which is largely
dominated by five key competitors. The top three
companies, Siemens Healthcare Diagnostics,
Ortho-Clinical Diagnostics, and Abbott Diagnostics
comprise about 36.5% of the market while
Beckman Coulter and Roche Diagnostics make up
another 16% of the segment
The hematology segment, on the other hand, is
highly fragmented and has numerous competitors.
The market leader in hematology is Beckman
Coulter with a market share of 14.1% followed by
Siemens Healthcare Diagnostics with 8.5%. Roche
Diagnostics, Sysmex, and Abbott Diagnostics

comprised 6.3%, 6.0% and 5.0%, respectively.
The remaining 60% of the hematology market is
made up of numerous companies including several
regional competitors.
The immuno chemistry segment is also somewhat
concentrated, but has more competitors than
the clinical chemistry segment. The top five
competitors have a combined market share of
about 40%. The two leaders in this segment
are Abbott Diagnostics and Siemens Healthcare
Diagnostics, each with about 12% followed by
Roche Diagnostics with 6%, Alere (formerly
Inverness Medical Innovations) 5.6%, and OrthoClinical Diagnostics 4.7%. The remaining 60%
of the immuno chemistry segment is made up
of numerous companies including bioMerieux,
Beckman Coulter, and others.
51
Figure 44 The U.S. In Vitro Diagnostics Testing Equipment & Supplies Market,
Company Market Shares by Revenue in 2009 (All segments combined)
Company
% Share
Siemens Healthcare Diagnostics
9.2
Abbott Diagnostics
9.0
Roche Diagnostics
6.7
Beckman Coulter
6.2
Ortho Clinical Diagnostics (J&J)
4.4
Alere
2.9
Becton Dickinson
2.7
Others
58.9
Total
100.0
Figure 44 shows the estimated market shares of

the leading companies in the overall U.S. IVD
market (all segments combined). The top four
companies comprised almost one-third of the
overall IVD market in 2009. Beckman Coutlers
2009 acquisition of Olympus Medical Systems
diagnostics business likely will move the company
ahead of Roche Diagnostics into the number three
position in 2010.
Listed below are the major competitors in the U.S.
IVD testing equipment and supplies market.
Abbott Diagnostics is a division of Abbott
Laboratories, a global healthcare company
that is doing business in over 130 countries.
Abbotts primary businesses are pharmaceuticals,
nutritionals, and medical products which include
diagnostics (both IVD and molecular) and
cardiovascular devices. The company employs
over 73,000 persons and had net sales of $30.765
billion in 2009. Abbott is a global leader in clinical
laboratory diagnostics. The Diagnostics Division
manufactures and markets diagnostic systems
and tests for blood banks, hospitals, consumers,
commercial laboratories and alternate care testing
sites on a worldwide basis. The division accounted
for $2.798 billion in 2009.
www.abbottdiagnostics.com
Alere Inc., formerly Inverness Medical
Innovations, is a leading diagnostics company that is
focused on three key areas: professional diagnostics,
health management, and consumer diagnostics.
Within the professional diagnostics area, Alere
focuses on point-of-care rapid diagnostic testing and
monitoring. The companys point-of-care market
for rapid diagnostic products consists primarily of
small and medium size laboratories and testing
locations and also physician office laboratories,
specialized mobile clinics, emergency rooms, and
some rapid-response laboratories in larger medical
centers. In 2009, Alere reported net sales of $1.365
billion and 11,300 employees. www.alere.com
Beckman Coulter, Inc. (BC) is a leading

manufacturer of biomedical testing instrument
systems, tests and supplies that simplify and
automate laboratory processes. The company offers
products across the biomedical testing continuum
from pioneering medical research and clinical
trials to laboratory diagnostics and point-of-care
testing, and includes centrifuges, blood analyzers,
and diagnostic rapid-test kits. In February 2011,
Danaher Corp. agreed to acquire Beckman Coulter
Inc. for $5.87 billion as it looked to gain a stronger
foothold in the growing diagnostics industry. The
deal was finalized after a rough 2010 for Beckman
Coulter following the recall of a faulty test for
heart problems, multiple financial-guidance cuts
and an unexpected CEO resignation. Under the
terms of the deal, Danaher paid $83.50 for each
Beckman share, which the companies say represents
a premium of about 45% over Beckman's trading
price December 9, 2010 before takeover rumors
surfaced. Earlier in 2010, Beckman Coulter shares
plunged following a quality issue with the cardiac
marker troponin and a subsequent recall that
reduced its market capitalization by $869 million.
Beckman Coulter has offices in 130 countries and
employs about 11,800 persons worldwide.
www.beckman.com
Becton Dickinson (BD) manufactures and
sells a broad range of diagnostic products, devices,
laboratory equipment and medical supplies. The
company serves healthcare institutions, life science
researchers, clinical laboratories, industry and
the general public. BD Diagnostics offers system
solutions for collecting, identifying and transporting
specimens, and advanced instrumentation for
analyzing specimens. The company also offers
services to help with their customers' process
flow, supply chain management, and training and
education. In 2009, BD had sales of $7.161 billion
and employed 29,116 persons in nearly 50 countries
around the world.
http://www.bd.com/
52
bioMrieux is a major player in the field of invitro infectious disease diagnostics. The company
designs, develops, manufactures and markets
reagents and automated instruments for medical
analyses. (Other product applications include
product quality control in the agri-food, cosmetics
and pharmaceutical industries). The company
had net sales of $1.76 billion in 2009, and ranks as
the eighth largest biological diagnostics company
worldwide. Over 85 percent of its activity takes
place on an international level. The company
employs 6,140 people worldwide, is present in over
170 countries through 39 subsidiaries and a large
network of distributors, and has 17 production
sites located in France, the Netherlands, the United
Kingdom, Italy, Spain, Sweden, the United States,
Brazil, China and Australia.
www.biomerieux.com
Ortho-Clinical Diagnostics, Inc., a subsidiary
of Johnson & Johnson, provides professional
diagnostic products to hospital laboratories,
commercial clinical laboratories and blood donor
centers. Its products include reagents used in
blood transfusions and blood screening; reagents
and instrument systems for clinical chemistry; and
RhoGAM, an injectable drug used to prevent
hemolytic disease of the newborn. Ortho-Clinical
Diagnostics had net sales of $1.96 billion in 2009.
www.orthoclinical.com/
Roche Diagnostics is a division of F.
Hoffmann-La Roche Ltd, Basel, Switzerland, and is
the world's leading provider of diagnostic systems.
The company offers a broad range of IVD and
molecular diagnostic products which are sold to key
research and production locations in more than 50
countries. Products include early detection, targeted
screening, evaluation and monitoring of disease.
Roche Diagnostics employs a total of 25,967
people worldwide. The North American division
employs over 6,700 people, and is one of five global
centers for Roche Diagnostics. The companys
Indianapolis site in the U.S. is a key manufacturing
site for Roche's blood glucose monitoring strips,
and is responsible for the marketing, sales, service
and distribution of all Roche Diagnostics' products
sold within North America. www.roche-diagnostics.
com Roche Group reported sales of $47.6 billion in
2009. Within the Roche Group, Roche Diagnostics
had net sales of $9.7 billion.
Siemens Healthcare Diagnostics, Inc. (SHD)
was formed by the merger of Diagnostic Products
Corp., Bayer Healthcare Diagnostics and Dade
Behring. SHD is a wholly owned subsidiary of
Siemens Medical Solutions USA, Inc., and is the
largest clinical diagnostic businesses in the world.
The Companys diagnostic products division offers
a wide range of laboratory, self-testing, molecular
testing, and near patient (critical care and pointof-care) diagnostics systems which are focused on
the areas of cardiovascular and kidney disease,
oncology, virology, women's health, and diabetes.
SHD is one of the first companies to bring

together medical imaging and therapy, laboratory
diagnostics, and healthcare IT solutions across the
continuum of care from prevention and early
detection, to diagnosis, therapy and ongoing care.
In 2009, SHD reported worldwide sales of $17.1
billion of which $6.5 billion came from its U.S.
operations. SHDs diagnostic products division
generated U.S. sales of approximately $1.8 billion in
2009. SHD employs approximately 48,000 persons
worldwide in 130 countries.
diagnostics.siemens.com
Sysmex America, Inc. is the U.S. headquarters
for Sysmex Corp. (Japan), a leading international
manufacturer of diagnostic systems for medical
laboratories worldwide. Sysmex is involved in the
development of clinical laboratory testing devices,
reagents and software for hematology, hemostasis,
immuno chemistry, particle counting and urinalysis
as well as in the development of information
systems. The Americas division accounted for
about $234 million of the companys $1.1 billion in
sales in 2009. www.sysmex.com
Leading Competitors in the
Molecular Diagnostics Market
Leading competitors in the U.S. molecular
diagnostics market include most of the major
IVD manufacturers listed above plus the following
companies:
Cepheid is an on-demand molecular diagnostics
company that develops, manufactures, and markets
fully-integrated systems and tests for genetic analysis
in the clinical, industrial and biothreat markets.
The Company's systems enable rapid, sophisticated
genetic testing for organisms and genetic-based
diseases by automating otherwise complex manual
laboratory procedures. Cepheid is focusing on
those applications where rapid molecular testing is
particularly important, such as identifying infectious
disease and cancer in the clinical market; food,
agricultural, and environmental testing in the
industrial market; and identifying bio-terrorism
agents in the biothreat market. Cepheid reported
net revenues of $170 million and 530 employees in
2009. www.cepheid.com
Gen-Probe, Inc. is a global leader in the
development, manufacture and marketing of
rapid, accurate and cost-effective nucleic acid tests
used primarily to diagnose human diseases and
screen donated human blood. In October 2009,
the company acquired Prodesse, Inc., a leader in
molecular testing for influenza and other infectious
diseases. Gen-Probe reported net revenue of
$483.7 million and 1,250 employees in 2009.
www.gen-probe.com
Qiagen is a leading provider of sample and
assay technologies which are used to isolate DNA,
RNA, and proteins from any biological sample.
53
The Company has developed and markets more

than 500 consumable products and automated
solutions which are used by molecular diagnostics
laboratories, academic researchers, pharmaceutical
and biotechnology companies, and applied testing
customers for purposes such as forensics, animal or
food testing and pharmaceutical process control.
Qiagen's assay technologies include one of the
broadest panels of molecular diagnostic tests
available worldwide. This panel includes the digene
HPV Test, which is regarded as a "gold standard" in
testing for high-risk types of human papillomavirus
(HPV) as well as a broad suite of solutions
for infectious disease testing and companion
diagnostics. Qiagen reported net revenue of $1.01
billion in 2009 and employs more than 3,500 people
in over 35 locations worldwide.
www.qiagen.com
7.3. EMERGING TECHNOLOGIES
Abbott Prism Chagas Test
Abbott Laboratories announced on May 19, 2010
it received FDA approval to market the Abbott
Prism Chagas test. The test is a fully automated
blood screening assay that can detect antibodies
to Trypansoma cruzi (T. cruzi), a parasite found
only in the Americas and most commonly acquired
through contact with the blood-sucking triatomine
or "kissing bug." According to the Centers for
Disease Control and Prevention, an estimated
8-11 million people are infected worldwide with
Chagas disease and an additional 108 million
people are considered to be at risk. The approval
of the Abbott Prism Chagas test adds an important
automated tool to ensure the continued safety of the
blood supply because the system is used to screen
the majority of the blood supply in the U.S. and
more than 30 countries around the world.
ARCHITECT HE4
Assay Test for Ovarian Cancer
ongoing monitoring of the virus. Studies show

that antibody-only tests fail to identify up to 10
percent of HIV infections in some high-incidence
populations. However, the detection of the HIV
p24 antigen enables laboratories to diagnose HIV
infection before HIV antibodies are able to be
detected.
BD MAXTM GBS
Assay for Group B Streptococcus
BD Diagnostics, a business unit of Becton,
Dickinson and Co., announced on June 2, 2010
that it received FDA approval to market the BD
MAXTM GBS Assay for Group B Streptococcus
(GBS) on the BD MAX System. The BD MAX
System is a next-generation automated workstation
for molecular testing designed to streamline
workflow and offer full walkaway automation to
accommodate varying workloads for maximum
lab efficiency and flexibility. As new CDC
guidelines emerge to include molecular testing as
an alternative to culture for detecting GBS, the
BD MAX GBS assay could serve as an efficient,
sensitive and specific option for laboratories desiring
to utilize a molecular method.59
Gene Test for Tumors
Researchers at Johns Hopkins Universitys Kimmel
Cancer Center have developed a blood test based
on the DNA of tumors that could help tailor
treatment for individual patients by monitoring
the status of their cancer following a first course
of treatment. The test uses genome sequencing
technology which looks for rearrangements of
DNA in large sections of the genome of tumor
cells. The research suggests that by testing blood
for this finger print, the results will enable doctors
to determine if a patient treated for cancer is free
of disease or needs additional or more aggressive
treatment.60
In Vitro Blood Gas Monitor
Abbott Laboratories, Inc. announced on June 3,

2010 that it received FDA approval to market the
ARCHITECT HE4 (human epididymis protein 4)
assay. The new diagnostic test uses a simple blood
test to aid in monitoring for the recurrence or
progression of epithelial ovarian cancer, a disease
that will strike an estimated one out of every 71
women in the U.S. in their lifetimes. It is the first
automated test of its kind available in the U.S.
Sphere Medical announced on August 9, 2010 that

the results from an FDA clinical evaluation of its in
vitro blood gas monitor were comparable to those
of a current gold standard laboratory blood gas
analyzer in measuring glucose, carbon dioxide and
other key blood parameters in hospital patients.
Sphere says the report proves that its microanalyser
technology has the potential to bring laboratory
standard monitoring to a patients bedside.
ARCHITECT HIV Ag/Ab Combo Assay

Abbott Laboratories announced on January 25,
2010 that it has submitted a Premarket Approval
application for the ARCHITECT HIV Ag/Ab
Combo assay to the FDA for expedited review.
Once approved the assay is expected to be the first
test available in the U.S. to simultaneously detect the
combined presence of HIV antigens and antibodies,
which would allow for the early detection and
In Vivo Pathology Device

for Diagnosing Cancerous Cells
NinePoint Medical, Inc. is developing an in vivo
pathology device which could eventually allow
doctors to diagnose and treat cancerous cells during
biopsy procedures. NinePoint's device is an in
vivo platform designed to enable real-time review
of advanced tissue images during biopsies and
54
other procedures. The aim is to eventually allow

gastroenterologists to diagnose and treat cancerous
or otherwise suspicious cells during a single
procedure.61
Microfluidics Chip for
Specialized Immune Cell Analysis
Researchers at Massachusetts General Hospital
have developed a novel microfluidics chip that will
enable doctors to examine how white blood cells
help the body cope with burns and other traumatic
injuries. In the long term, scientists hope to use this
technology to predict which patients are most likely
to develop serious infections after an injury and
therefore need the most aggressive treatment.62
PanNAT System for

Point-of-Care Molecular
Diagnostics of Infectious Pathogens
Micronics, Inc. announced on October 18, 2010
that it received a $2.6 million award from the U.S.
Department of Defense to support development
of its PanNAT system for point-of-care molecular
diagnostics of infectious pathogens. The PanNAT
system will directly detect multiple blood-borne
pathogens, including hepatitis B and C and HIV,
in fresh blood samples. The award will advance
the development of assays on the compact, WiFienabled, mains and/or battery-powered PanNAT
instrument. Other PanNAT assays currently in
development include a malaria assay which detects
all species that cause malaria and an E. coli assay.
MRSA Detection Device

Pathwork Tissue of Origin Test
The University of Mississippi Medical Center and
California-based medical device manufacturer
QuantaLife have received a $7 million grant from
the National Institute of Biological Imaging and
Bioengineering to conduct a 5-year study to test
a new device for identifying methicillin-resistant
Staphylococcus aureus, or MRSA. QuantaLifes
device is a 3rd generation PCR instrument that
should provide results in less than 15 minutes at a
cost of $2 per test. If proven successful the, device
would reduce the chance of MRSA spreading
because hospitals could more quickly screen all
clinical patients and those being admitted.63
NADiA ProsVue PSA Assay
for Detecting Prostate Cancer Recurrence
Iris International, Inc. is developing the NADiA
ProsVue PSA Assay test which reliably predicts
prostate cancer bio chemical recurrence (BCR)
after radical prostatectomy (RP). The Company's
NADiA ProsVue PSA Assay is able to detect levels
and increasing levels of PSA that were previously
undetectable using conventional ultra sensitive
assays, thus potentially enabling the detection of
BCR an average 2-1/2 years earlier than with the
most sensitive commercially available tPSA assays.
Pending FDA approval of the Companys 510(k)
application which was submitted April 29, 2010, Iris
Intl hopes to launch the product in the U.S. in late
2010 or early 2011.64
Oncotype DX Colon Cancer Test
Genomic Health, Inc. announced on January
21, 2010 worldwide commercial availability
of its Oncotype DX(R) colon cancer test, the
first multigene expression test developed for the
assessment of risk of recurrence in patients with
stage II colon cancer. The 12-gene advanced
diagnostic test is clinically validated to predict
individual recurrence risk in stage II colon cancer
patients following surgery.
Pathwork Diagnostics, Inc. announced on June

Pathwork Tissue of Origin Test for formalinfixed, paraffin-embedded (FFPE) tissues. The test
uses microarray-based RNA profiling to compare
the patients specimen to a database of known
tumor types. The highly accurate and reproducible
results are evaluated by the physician in the context
of the patients clinical history and complementary
diagnostics, such as immunohistochemistry.
Pathwork has the only FDA-cleared molecular
classification tests for tissue of origin. The FDA
clearance allows the Tissue of Origin Test to be
broadly utilized on common clinical FFPE tumor
specimens from both community and research
hospitals and paves the way for additional FFPEbased cancer tests on the Pathwork platform.
Xpert(R) SA Nasal Complete SA
and MRSATest
Cepheid, Inc. announced on June 8, 2010 it
received FDA approval to market Xpert(R) SA
Nasal Complete, the first and only molecular
test designed for the simultaneous detection and
differentiation of both Staphylococcus aureus (SA)
and Methicillin-resistant Staphylococcus aureus
(MRSA) colonization in less than one hour.
VERSANT kPCR Sample Prep
Siemens Healthcare Diagnostics announced
on July 28, 2010 that it was presenting its new
VERSANT kPCR Sample Prep system at the
American Association for Clinical Chemistrys 2010
Clinical Lab Expo in Anaheim, CA. The system
is a universal system for the isolation of DNA
and RNA in multiple molecular applications, and
offers enhanced sample identification and quality
extraction in PCR (polymerase chain reaction)
results. This system has not yet been approved for
sale in the U.S.
55
8. Medical Imaging
equipment, which include gamma camera, positron
emission tomography (PET), and single photon
emission computed tomography (SPECT); (7) Angio
suite, (8) Bone densitometry; (9) C arms; and
(10) Contrast media injectors.

According to GlobalData, the U.S Diagnostic
Imaging Equipment market was valued at just over
$6.2 billion in 2010 and is forecast to grow to a
value of over $7.8 billion in 2015. This represents
a compound annual growth rate (CAGR) of 4.6%
and a market value increase of $1.5 billion over the
5-year period.
The Ultrasound systems segment is the largest

segment of the diagnostic imaging market and is
forecast to grow from $1.4 billion in 2010 to $1.8
billion in 2015. Between 2008 and 2010, the market
declined, but is expected to grow at a rate of about
5.1% per year through 2015. The MRI segment is
the second largest imaging equipment segment and
is forecast to grow at a slightly faster rate (5.8%) than
the ultrasound segment. Computed Tomography
Systems is the third largest segment and is expected
to experience a growth rate just above the overall
market average. Figure 45 depicts market growth
across all segments through 2015.
GlobalData divides the diagnostic imaging

equipment market into ten primary segments.
These segments include: (1) Ultrasound systems,
which include black and white systems and color
doppler systems; (2) Computed Tomography
systems, which include low, mid, and high slice CT;
(3) MRI systems, which include open and closed
systems;(4) X-Ray systems, which include analog
and digital X-Ray systems; (5) Mammography
equipment, which include film screen, fullfield mammography equipment and digital
mammography equipment; (6) Nuclear Imaging
Figure 45 U.S. Diagnostic Imaging Equipment Market by Type of Equipment (US$ Billions)
Type of Equipment
2010
2011
2012
2013
2014
2015
2010-2015
CAGR (%)
Ultrasound Systems
1,425
1,493
1,566
1,645
1,731
1,825
5.1
MRI Systems
1,251
1,313
1,383
1,463
1,553
1,655
5.8
Computed Tomography Systems
1,080
1,126
1,177
1,234
1,297
1,367
4.8
X-Ray Systems
916
942
969
997
1,027
1,058
2.9
Mammography Equipment
441
461
484
508
534
562
5.0
Nuclear Imaging Equipment
382
412
447
484
526
571
8.4
Angio Suite
279
280
280
280
282
282
0.2
Bone Densitometry
267
271
275
279
284
288
1.5
C arms
146
150
154
158
162
166
2.6
Contrast Media Injectors
72
73
74
75
76
77
1.4
Total
6,259
6,520
6,808
7,123
7,471
7,849
4.6
Recently, a new category of ultrasound diagnostic

devices has started to emerge. These new
handheld-size ultrasound devices are just slightly
larger than an iPhone. This is the fastest growing
segment in the overall ultrasound market. In
2008, the worldwide portable ultrasound market
was estimated at $680 million. Industry experts
believe handheld ultrasound devices could displace
sales in the $5 billion global market for laptop-size
ultrasound machines.65
The U.S. Diagnostic Imaging Equipment market

is dominated by four companies. GE Healthcare
is the market leader with 27% followed by
Philips Healthcare with 22.3% and and Siemens
Healthcare with 18.5%. Toshiba Medical Systems
is a distant fourth with a market share of about 5%.
GE Healthcare is the market leader in ultrasound
systems, MRI systems, Computed Tomography,
and bone densitometry, and is number two in X-ray
systems, mammography equipment, and nuclear
imaging equipment.
56
Figure 46 Market Share of the Leading Diagnostic Imaging Equipment Manufacturers in 2009
27%
GE Healthcare
Hospitals 59.2%
27.3% Others
4.9% Toshiba
Medical
Systems
18.5% Siemens
Healthcare
The U.S. diagnostic imaging market can be divided into four primary customer groups. The largest
customer group of imaging equipment is hospitals which purchased about three-fourths of all the imaging
equipment in 2010. Laboratories were a distant second with a distribution share of 14.1% followed by
clinics with 7.6% share and acute care centers with 3.9% share. Actual distribution in each specific market
segment varies somewhat, but in all cases hospitals were the primary customer group where they accounted
for 70-75% of all purchases.
Figure 47 U.S. Diagnostic Imaging Equipment Market, by Customer Group, 2010
74.4% Hospitals
Laboratories 14.1%
Clinics
7.6%
AcuteCare
Centers
3.9%
3D Imaging
The 3D imaging market is becoming one of
the highest growth areas in the field of medical
imaging Magnetic Resonance Imaging (MRI),
Computed Tomography (CT), and Ultrasound.
The technology provides physicians with three
dimensional images of internal body structures
and enables them to more precisely detect and
diagnose diseases. Industry experts expect most of
the applications will help improve the standard of
care for patients by reducing the need for invasive
imaging technologies, however, the technology is
currently limited to large hospitals due to its high
price and lack of reimbursement. (3D imaging
is not recognized as a separate procedure, but is
instead bundled together with other diagnostic
procedures as a Diagnosis-Related Group [DRG]).
Growth in this market is expected to accelerate as
applications become more affordable. According
to Global Industry Analysts, the U.S. market for
3D imaging equipment was valued at $807 million
in 2008 and is forecast to grow at a CAGR of
11.5% to $1.39 billion in 2013. In 2008, the U.S.
comprised about 35% of the world market.
The 3D medical imaging market is being driven

by technological advancements that continue
to improve the benefits of 3D medical imaging
systems as well as continued progression in the field
of computer hardware and software. 3D systems
are quickly moving from UNIX to PC-based (NT)
workstations. Workstations that are able to process
large numbers of images generated by the latest
CT scanners and other types of systems are in high
demand. Consequently, there are good market
opportunities for manufacturers of computers and
developers of software for image processing such as
picture archiving and communication systems.
Imaging3, Inc. has recently introduced the
DominionTM 3D medical imaging scanner which
uses high-resolution photo-flouroscopy to produce
3D medical diagnostic images in real-time. Because
the 3D images are in real-time, they can be used
for any current or new procedures which require
multiple frames of reference to perform medical
procedures on, or in the human body. This new
breakthrough technology is poised to benefit
numerous medical sectors including cardiology,
trauma, orthopedics, sports medicine, pediatrics,
vascular, neuro-vascular, and pain management.66
57
Hologic received in February 2011 FDA approval

to market the Selenia Dimensions 3D Digital
Mammography (Breast Tomosynthesis) System.
Clinical trials using Hologic's Dimensions 3D
system showed measurable improvement in clinical
performance over conventional mammography.
These trials also showed significant gains in
specificity - the confidence to rule out cancer
without recalling the patient for further study
- and other benefits including improved lesion
and margin visibility and the ability to accurately
localize structures in the breast. The combination
of measurable improvements in accuracy and
detection, and improved sensitivity, makes the
Dimensions 3D system a superior system versus
conventional 2D digital mammography systems.67
Leading companies in the U.S. 3D imaging market
include Barco, Biosound Esaote, GE Healthcare,
Hologic, Medison America, Philips Healthcare,
Siemens Healthcare, Toshiba Medical Systems, and
Vital Images.
Molecular Imaging
Molecular Imaging (MI) is a diagnostic imaging
procedure which combines molecular contrast
agents with traditional imaging tools to capture
pictures of specific molecular pathways in the body,
particularly those that are key targets in disease
processes. MI has the potential to detect, diagnose
and treat disease in vivo, and at the same time show
how well a particular treatment is working. The
field of molecular imaging has become possible
through advances in molecular and cell biology
techniques, new methods of combinatorial drug
design, high throughput testing, and the emergence
of novel imaging techniques and probes. While MI
began with, and still uses, highly sensitive nuclear
medicine techniques including positron emission
tomography (PET) and single photon emission
computed tomography (SPECT), scientists expect
all imaging modalities will eventually be affected by
molecular imaging. There are already considerable
advances in the development of new molecular
contrast agents that can enable molecular imaging
using MRI, ultrasound, computed tomography (CT)
and optical imaging. Leading imaging equipment
manufacturers including GE Healthcare, Siemens
Healthcare, Philips Healthcare and Toshiba are
teaming up with contrast media companies to
develop the next generation of molecular imaging
equipment. While MI today focuses on anatomy
and morphology, imaging modalities will evolve
to image the anatomy, its morphology and the
molecular processes involved.
Molecular imaging allows clinicians to generate
information beyond what is directly available from
captured images. Software packages created for
molecular imaging systems can provide Computer
Assisted Diagnostic (CAD) information used
by physicians to interpret images and generate
prognostic information. For example, CAD
application in molecular imaging has the potential

to suggest how quickly a cancer is growing
by determining how rapidly cancer cells are
proliferating and how many are (or are not) dying.
Once this assessment is made, physicians can
compile an evidence-based database to determine
how best to treat patients with cancers growing at
specific rates. In addition, software packages have
been developed to further enhance the detail of
information available to clinicians through fusion
imaging. Fusion imaging combines two different
kinds of diagnostic scans (i.e. CT/MR, CT/PET,
CT/SPECT, etc.), or the same modality (i.e. CT/
CT, MR/MR, etc.) at different times or with
different scan conditions, to create a more complete
picture of what is going on within the body.
The combined scan can provide more detailed
information than is available with either of the
scans by themselves.
Molecular Imaging and
Contrast Agent Database
This database provides a list of the 917 agents
currently listed (as of 1 December 2010):
www.ncbi.nlm.nih.gov/books/NBK5330/
IN THE U.S. MEDICAL IMAGING MARKET
General Electric (GE) Healthcare
GE Healthcare is headquartered in the United
Kingdom and is a $17 billion unit of General
Electric Company. Worldwide, GE Healthcare
employs more than 46,000 people in more than
100 countries. Product areas include digital x-ray,
ultrasound, nuclear medicine, positron emission
tomography, computed tomography, magnetic
resonance imaging, surgical navigation and
interventional imaging systems, and clinical IT. GE
Healthcare's broad range of products and services
enables healthcare providers to better diagnose and
treat cancer, heart disease, neurological diseases,
and other conditions earlier.
www.gehealthcare.com/
Hitachi Medical Corp.
Hitachi Medical Corp. is an integrated medical
systems manufacturer involved in every aspect of
the medical equipment and medical information
systems business. The Company provides
diagnostic imaging systems including Magnetic
Resonance Imaging (MRI) systems, diagnostic
ultrasound systems, X-ray Computed Tomography
(CT) systems, and X-ray systems. Hitachi Medical
Systems America (HMSA) is responsible for
marketing and support of all Hitachi diagnostic
imaging products in the U.S. HMSA has developed
a leadership position in Open MRI with over 1,500
installations throughout the U.S. The Company
primarily focuses on sales of MRI systems in North
America and diagnostic ultrasound systems in
Europe. In 2009, Hitachi Medical Systems reported
58
worldwide net sales of $466 million and U.S. sales

of about $70 million. The Company employs 2,259
persons. www.hitachi-medical.co.jp/english/index.
html
Hologic, Inc.
Hologic, Inc. is a leading developer, manufacturer
and supplier of premium diagnostics, medical
imaging systems, and surgical products focused on
the healthcare needs of women. The Company
offers a comprehensive suite of technologies
with products for mammography and breast
biopsy, radiation treatment for early-stage breast
cancer, cervical cancer screening, treatment for
menorrhagia, osteoporosis assessment, preterm
birth risk assessment, mini C-arms for extremity
imaging, and molecular diagnostic products
including reagents for a variety of DNA and RNA
analysis applications. The company received FDA
approval to market the first in the U.S. 3D digital
mammography system on February 11, 2010. In
2009, Hologic reported net sales of $1.427 billion
and 3,959 employees. www.hologic.com/
Medison America
Medison America, a subsidiary of Medison
Healthcare of Korea, is recognized as a world
leader in 2D- 3D- and 4D- ultrasound technology.
The company offers a comprehensive selection
of innovative ultrasound products from portable
devices to multi-specialty 3D console systems. Some
of Medisons leading technological developments
include digital beamforming, digital volumetric
technology, and 3D Multi-Slice View. Medison has
a global network consisting of 10 overseas affiliates
and 110 agencies in 100 countries. The Company
employs 422 persons worldwide.
www.medisonusa.com
Philips Healthcare
Philips Healthcare is a leading supplier of
diagnostic imaging equipment, information
technology and related healthcare services. Product
areas include general X-ray, ultrasound, nuclear
medicine, computed tomography, magnetic
resonance imaging, cardiac and monitoring systems,
clinical IT, and radiation therapy planning. Philips
Healthcare is also a leader in the molecular imaging
arena. The company is developing next-generation
PET as well as single photon emission computed
tomography (SPECT) systems that meet the unique
requirements of molecular imaging. In 2009,
Philips Healthcare reported worldwide sales of
$11.3 billion of which $5.3 billion came from its
North American operations. Philips Healthcare
employs 34,296 persons and has sales and service
operations in 63 countries and distribution in over
100 countries.
www.medical.philips.com/us/
Siemens Healthcare
Siemens Healthcare (SH) is one of the largest
suppliers of healthcare equipment in the world.
The companys Imaging and IT division offers
innovative products, services and complete
solutions, ranging from imaging systems for
diagnosis and therapy equipment for treatment,
to electromedicine and hearing instruments, to
IT solutions that optimize workflow and increase
efficiency in hospitals, clinics and doctors' offices.
Product areas include fluoroscopy, angiography,
ultrasound, nuclear medicine, computed
tomography, magnetic resonance imaging,
radiography, molecular imaging, patient monitoring
systems, clinical IT, and mammography. In 2009,
SH reported worldwide sales of $17.2 billion of
which $6.5 billion came from its U.S. operations.
SHs Imaging and IT division generated U.S. sales
of approximately $3.9 billion in 2009. SH employs
approximately 48,000 persons worldwide in 130
countries. www.siemensmedical.com
TomTec Imaging Systems
TomTec Imaging Systems, GmbH is the worldwide
leader for 2D-, 3D- and 4D- solutions in the area
of medical ultrasound, and seeks to be a worldwide
leader in medical imaging software solutions.
The Company is based near Munich, Germany.
TomTecs North American market is handled by
its subsidiary, TomTec Corp., which is located in
Chicago. Since 1990, the company has developed
as a pioneer in 3D/4D ultrasound, Stress Echo and
Image Management technology. The companys
product line encompasses a wide range of 2D
and 3D/4D technology for visualization, analysis,
quantification and information-processing as well
as for management of multimodality image data.
TomTecs products are applicable to the fields of
adult and pediatric cardiology as well as obstetrics,
gynecology, radiology, and vascular diagnostics.
www.tomtec.de
Toshiba America Medical Systems, Inc.
Toshiba America Medical Systems, Inc. is a
leading developer, manufacturer and supplier of
diagnostic and medical imaging systems. The
Companys product line includes diagnostic X-ray
systems, medical X-ray CT systems, magnetic
resonance imaging systems, diagnostic ultrasound
systems, radiation therapy systems, diagnostic
nuclear medicine systems, medical sample testing
equipment, and information systems for medical
equipment. medical.toshiba.com/
Vital Images, Inc.
Vital Images, Inc. is a leading provider in the area
of advanced visualization and image analysis
solutions. The companys software enables the
visualization and analysis of 2D, 3D and 4D images
of anatomy and physiological function using
59
CT (computed tomography) and MR (magnetic

resonance) scan data. Vital Images has more than
3,500 customers in 83 countries worldwide. In
2009, the company had net sales of $58.2 million
and 246 employees. www.vitalimages.com
Leading companies in the U.S. molecular
contrast agent market include:
Advanced Biomarker Technologies, Avid
Radiopharmaceuticals, Aposense, ART
Advanced Research Technologies, Cell Point,
Covidien, Endocyte, Fluoro Pharma, Guerbet,
Lantheus Medical Imaging, Molecular Insight
Pharmaceuticals, and others.
8.3.
ACUSON X150 Ultrasound System

Siemens Healthcare Diagnostics announced on
June 2, 2010 the launch of the 2.0 release of its
ultra-compact ACUSON X150 ultrasound
system. The system features advanced technologies
that dramatically improve detail resolution, image
uniformity, and color Doppler sensitivity.
Biograph mMR Whole-Body
Integrated MR-PET System
Siemens Healthcare Diagnostics introduced on
November 19, 2010 the Biograph mMR WholeBody Integrated MR-PET System. The Biograph
mMR is the first clinical device to combine
magnetic resonance imaging (MRI) with positron
emission tomography (PET). The whole body
scanning capability of the system enables doctors
to simultaneously locate tumors and detect whether
they are malignant and how fast they are growing.
The system has the potential to be a particularly
valuable tool for identifying neurological,
oncological, and cardiac conditions of disease and
in supporting the planning of appropriate therapies.
Combination MRI and
Radiation Therapy Technology
ViewRay, Inc. is in the late stages of developing
an MRI-based technology to deliver radiation
therapy to cancer patients. The new technology is
expected to help doctors see exactly where radiation
is being delivered to a cancer patients body, unlike
existing technology, which doesnt account for the
movement of internal organs. That movement
can cause radiation to be delivered to healthy
issue, leading to harmful side-effects. ViewRays
technology aims to solve that problem by providing
continuous soft-tissue imaging for more accurate
delivery of radiation therapy.
Flurpiridaz F 18 injection
Siemens Healthcare Diagnostics announced on
June 7, 2010 that it has developed a new imaging
agent called flurpiridaz F 18 injection which uses

a fluorine-18 (F-18) based radioisotope. The
imaging agent is still in clinical trials, but has been
shown to facilitate very high quality imaging of
the heart. Other PET agents used to image the
heart have a much shorter half-life and need to
be produced within an on-site cyclotron, which
limits access. Some agents can be produced on site
with a generator, but image quality appears not
to be as high. F-18 has a half-life of 108 minutes
and therefore can be delivered to imaging centers
located within a wider radius, with no compromise
to image quality. Combining F-18 with a molecular
imaging technique that reduces blur caused by
the motion of the heart and lungs could lead to
unprecedented image quality when conducting
myocardial perfusion imaging.
Karl Storz Photodynamic
Diagnostic D-Light C (PDD) System
Karl Storz Endoscopy America, Inc. received on
May 28, 2010 FDA approval to market the Karl
Storz Photodynamic Diagnostic D-Light C (PDD)
System. The device is used as an optional accessory
to white light cytoscopy when used in combination
with the diagnostic imaging drug Cysview, which
is produced by the Norwegian pharmaceutical
company Photocure ASA. The device works by
light being transmitted through a fluid light cable
connected to an endoscope to light up the area to
be observed. Blue light is used to excite Cysview
that has collected in cancerous tissue. The D-Light
C PDD System when used in combination with
the Cysview is used to detect non-muscle invasive
papillary cancer of the bladder.
Molecular Breast Imaging System
GE Healthcare announced on June 6, 2010 it is
collaborating in two clinical trials with the Tel Aviv
Sourasky Medical Center in Tel Aviv, Israel and
Hamilton Health Sciences Hospital in Ontario,
Canada on the use of a novel technology that
may assist in assessment and early detection of
breast cancer in women who are at high risk
for the disease. GEs investigational Molecular
Breast Imaging (MBI) system is a gamma camera
dedicated for breast imaging based on accumulation
of a radioactive tracer in hypermetabolic cancer
cells. The innovation of the MBI technology is the
use of imaging detectors, Cadmium Zinc Telluride
(CZT), to replace the standard NaI detectors
routinely used for gamma cameras, in a dedicated
breast device.
Pathology Slide Scanner
and Image Management System
Philips Electronics announced on March 18, 2010
it is developing a prototype slide scanner and
image management system in close collaboration
with leading pathology departments to meet
the requirements for a seamless fit into existing
workflows. By digitizing the images that
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pathologists normally view through a microscope,

Philips goal is to offer solutions that help to
enhance the operational efficiency and productivity
of pathology departments, as well as increase
diagnostic confidence. Based on analysis of the
throughput requirements of pathology departments,
the scanner will be designed to achieve a total
slide handling and imaging time of less than 50
seconds per slide, with the ability to pre-load up
to 300 slides. In addition, the prototype image
management system will be designed to handle data
rates as high as 500 MB/sec in order to efficiently
store, retrieve and view the digital images.
The PROcedure Rehearsal Studio software is

intended for use as a software interface and image
segmentation system for the transfer of imaging
data from a medical scanner such as a CT scanner
to an output file. It is also intended as pre-operative
software for simulating and evaluating surgical
treatment options. Unique to the Simbionix
simulation systems, the 3D segmentation model can
be exported to the Simbionix ANGIO MentorTM
Simulator practice environment. The results are an
advanced method of creating an ever expanding
library of modules for training and post-operative
debriefing.
PET + MR Sequential Imaging System

GE Healthcare is developing an imaging system
which utilizes sequential imaging together with
integrated registration (PET + MR) that will consist
of two scanning devices with a shared transport
system and the image registration application
running on the Advantage Workstation. The
system will allow a patient to be moved from one
device (PET/CT) to the other device (MR) without
changing positions on the table. The Sequential
integrated registration will enable applications
requiring accurate registration of PET/CT and
MRI, and at the same time allow the use of assets
for routine standalone clinical exams.68
PoleStar N30 Surgical MRI System
Medtronic announced on April 26, 2010 it received
FDA clearance to market the PoleStar N30
Surgical MRI system for neuro oncology surgical
solutions. The system provides real-time imaging
in the operating room and provides surgeons
with targeting and navigational accuracy despite
the anatomy movement that may occur during a
surgical procedure. With intra-operative imaging
information, neurosurgeons gain more confidence
to achieve maximum tumor resection, while
avoiding critical areas of the brain.69
PROcedure Rehearsal StudioTM Software
Simbionix USA Corp. announced on September
PROcedure Rehearsal StudioTM Software.
Real-time, In Vivo High

Resolution Micro Imaging System
SonoSite announced on May 27, 2010 that it
will acquire VisualSonics, the world leader in
real-time, in vivo high resolution micro imaging
systems. Visualsonics has developed ultrasound
technology that could set a new standard for
visualizing superficial soft tissue. The microultrasound technology uses five times the center
frequency range currently used in conventional
ultrasound systems (40MHz versus 8MHz) and
enables the visualization of superficial anatomy
on small living animals with microscopic detail,
discerning features as small as 40 microns (versus
conventional ultrasound, which visualize 200
microns). The acquisition has the potential to
develop major enhancements in the clinical pointof-care ultrasound market, enabling expansion into
new clinical markets and applications that were
previously thought impossible.70
vScan Handheld Ultrasound Device
General Electric (GE) has developed a handheld
ultrasound device called the vScan. The device
provides ultrasound imaging, measurement and
analysis in the clinical applications of abdominal;
cardiac (adult and pediatric); urological, fetal/OB;
pediatric; and thoracic/pleural motion and fluid
detection, as well as for patient examination in
primary care and in special care areas. The vScan
is the size of a cell phone and sells for $7,900.
9. Rehabilitation Equipment
According to Patterson Medical, the worldwide rehabilitation medical supplies and assistive products
market was valued at about $5.6 billion in 2009. Primary product areas include: (1) Orthopedic products,
such as braces, splints and continuous passive motion machines; (2) Aids to daily living, such as dressing,
dining, and bathing devices; (3) Rehabilitation equipment, such as treatment tables, mat platforms, and
stationery bicycles; (4) Clinical products, such as exercise bands, weights, balls, and mats; and (5) Mobility
products, such as walkers, canes, crutches, scooters, wheelchairs and wheelchair accessories. The value of
the U.S. rehabilitation medical supplies and assistive products market is estimated at $4.1 billion in 2009.
Patterson expects the total market will grow faster than the overall economy over the next several years.
61
Favorable demographic trends including increased life expectancy, active life styles and a general
willingness to spend discretionary income on healthcare and well being should contribute to continued
growth in demand for products.
Figure 48 U.S. and Worldwide Rehabilitation Medical Supplies
and Assistive Products Market, 2009-2013 ($Billions)
2009 U.S.
2013 U.S.
2009 WW
2013 WW
2009-2013
(AAGR)
Rehabilitation medical supplies and assistive products

(excl. wheelchairs & scooters)
2.6
2.9
3.4
3.8
3.0
Wheelchairs & scooters
1.5
1.7
2.2
2.5
3.0
Total
4.1
4.6
5.6
6.3
3.0
Source: Extrapolated data from Patterson Companies, Inc., Fiscal 2009 and 2010 Annual Reports
The various factors driving growth in the

rehabilitation medical supplies and assistive
products market include:
(1) An increasing number of reconstructive and
implant surgeries performed each year. The U.S.
market for orthopedic joint reconstructive devices
and spinal products already exceeds $11.8 billion.
(See Figure 25, Page 49). These two surgical
segments are forecast to grow about 9.3% and
6.6% per year, respectively, for the next several
years thereby increasing the demand for continuous
passive motion machines, splints, and braces which
are very important to post-surgical rehabilitation.
(2) There is an increasing number of Physical
Therapists (PTs) and Occupational Therapists
(OTs) which are important customer groups for
rehabilitation equipment. The U.S. Department of
Labor estimates there were about 185,000 PTs and
104,000 OTs in the U.S. in 2008. Approximately
60% of PTs are employed in either hospitals or
physical therapy clinics while the other 40% are
employed in home health agencies, nursing homes,
outpatient rehabilitation clinics, and physician
offices The majority of OTs works in hospitals
while the remaining OTs work in outpatient
occupational therapy offices and clinics, nursing
homes, home health agencies, and schools. The
demand for PTs and OTs is expected to remain
strong because of (i) an increasing number of
persons with disabilities or limited function who
need therapy services, (ii) an expanding age
group with a propensity to develop chronic and
debilitating conditions that need therapeutic
services, and (iii) a baby-boom generation that is
approaching the prime age for heart attacks and
stroke, which will increase the demand for cardiac
and physical rehabilitation.
(3) Current trends indicate that the 65-84 and 85+
age groups represent the majority of home and
community-based healthcare patients, and these
age groups are expected to grow considerably over
the next 30 years. The U.S. Census Bureau projects
that the 85+ age group will more than double in
size from less than 6 million in 2010 to 14 million
by 2040. Likewise, the 65-84 age group is expected

to double in size during the same period. This
demographic is an important market driver because
about 10% of people over age 65 and about 50%
of people over age 85 need assistance with everyday
activities.71
Other Market Trends
Studies show that seven out of ten people will
experience some form of disability during their
lifetime. It is estimated that approximately 9 million
people in the U.S. could benefit from physical
medicine and rehabilitation services. However,
industry professionals estimate that only half
of this group actually receives comprehensive
medical rehabilitation because of a shortage of
rehabilitation resources.72
As a result there is a growing demand for
rehabilitation equipment that can be used in the
home. Recent trends show that home healthcare
expenditures are becoming an increasingly higher
percentage of total healthcare expenditures in
the U.S. In the area of treatment, many medical
professionals and patients prefer home healthcare
over institutional care because home healthcare
results in greater patient independence, increased
patient responsibility, and improved responsiveness
to treatment. In addition, healthcare professionals
as well as both public and private payers appear to
favor homecare as a cost effective, clinically viable
alternative to facility based care. Recent surveys
indicate that about 70% of adults would rather
recover from an accident or illness in their home and
about 90% of persons age 65+ prefer home-based,
long-term care. From a cost perspective, homecare is
one-fifth the cost of institutionalized care.
In part, cost containment efforts have driven earlier
hospital discharges necessitating technological
advances that allow medical rehabilitation
equipment to increasingly be adapted for use in
the home. Also, continuing medical advances
which prolong life in both adults and children will
increase the demand for home medical care and
rehabilitation equipment.73
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Competition
The rehabilitation equipment and supplies market
is both highly competitive and highly fragmented.
Most of the companies that distribute rehabilitation
products in the U.S. are generally either locally
or regionally focused with a few exceptions such
as Invacare and Patterson Medical which have
national distribution. The average order size in this
market is only about $225.
Successful companies offer value to the customer
which can be achieved by a combination of
variables. Product quality, performance, and price
are important attributes in the perceived value to
the customer. In addition, the range of products
offered, the technical expertise of the companys
sales force, the strength and effectiveness of the
dealer and distributor network, and the availability
of prompt and reliable service are also important
factors that can affect a companys success in this
market.
Marketing and Distribution
There are a number of avenues that manufacturers
and distributors of rehabilitation equipment are
using to reach customer groups. Some of the
leading companies use a combination of these
methods while others may use only one method.
Sales and marketing efforts to both institutions
and end-users include using a direct sales force,
telesales, manufacturers agents, catalog sales, and
on-line sales. Also, because of the growing demand
for rehabilitation products in the home healthcare
market, there is an increased effort by companies to
reach the end-user. The distribution network has
expanded to include retail dealers of rehabilitation
supplies and equipment, surgical supply houses,
hospital and HMO-based stores, home health
agencies, retail drug stores, mass merchandisers,
rental companies, direct sales, and the Internet, in
addition to the traditional hospital clinics, longterm care facilities, nursing homes, outpatient
rehabilitation clinics, and physician offices. Leading
customer groups include physical and occupational
therapists in acute care hospitals, long-term care
facilities and rehabilitation clinics, and major
national providers of rehabilitation services such as
the Veterans Administration, HCA, HealthSouth,
Horizon Health Corp., Kindred Healthcare,
Rehabcare Group, Tenet, and others. In addition,
some companies are using pull-through marketing
strategies to medical professionals, including
physical and occupational therapists, who refer their
patients to home medical equipment providers to
obtain specific types of home medical equipment, as
well as to consumers, who have a particular product
or brand preference.
Reimbursement Issues
The Centers for Medicare and Medicaid Services
(CMS) has developed general criteria for Medicare
coverage of patients receiving treatment on

an inpatient basis. CMS reimburses inpatient
rehabilitation facilities (IRFs) via a Prospective
Payment System (PPS). (IRFs are free standing
rehabilitation hospitals and rehabilitation units in
acute care hospitals). Under IRF PPS, patients
are classified into case mix groups based upon
impairment, age, co-morbidities (additional
diseases or disorders from which the patient
suffers) and functional capability. IRFs are paid a
predetermined amount per discharge that reflects
the patients case mix group and is adjusted for
area wage levels, low-income patients, rural areas
and high-cost outliers. Known as the 60 percent
rule, the rule requires that 60 percent of a facilitys
inpatients over a given year must be treated for
one or more of the following conditions either as a
primary reason for receiving treatment in the IRF
or as a qualifying co-morbidity:
(1) Stroke; (2) Spinal cord injury; (3) Congenital
deformity; (4) Amputation; (5) Major multiple
trauma; (6) Fracture of femur or hip; (7) Brain
injury; (8) Neurological disorders; (9) Burns; (10)
Arthritis-related medical conditions (three types
specified in the rule); or (11) Knee or hip joint
replacement if (i) it was bilateral, (ii) the patients
Body Mass Index was greater than 50, or (iii) the
patient was 85 or older.
In addition, Medicare fiscal intermediaries are
authorized to develop and implement Local
Coverage Determinations (LCD) to determine the
medical necessity of care provided to Medicare
patients where there is no national coverage
determination. Some intermediaries have finalized
their LCDs for rehabilitation services. A restrictive
rehabilitation LCD has the potential to significantly
impact Medicare rehabilitation payments. Some
fiscal intermediaries have implemented LCDs that
are more stringent than the 60 percent rule or
have retroactively denied coverage based on new
LCDs. This being the case, treatment of patients
whose medical conditions do not meet any of the
approved conditions is significantly restricted. IRFs
are projected to receive approximately $6.25 billion
in payments from the Medicare program in fiscal
year 2011.
Outpatient rehabilitation therapy services are
reimbursed by Medicare under the Physician Fee
Schedule. A fixed fee is paid per reimbursable
procedure performed. There are two types of
annual per-beneficiary limitations on outpatient
therapy services provided outside of a hospital
setting: (1) a $1,860 cap for all outpatient therapy
services and speech language pathology services
combined; and (2) a $1,860 cap for all outpatient
occupational therapy services.
The U.S. rehabilitation equipment and supplies
market is a highly fragmented market with many
competitors of various sizes. Some of the larger
63
companies such as Invacare, Medline, and Patterson

Medical, manufacture and distribute their own
products and they also distribute products from
other manufacturers. Only a few companies have
national coverage most are either regionally or
locally focused. Some companies are focused
exclusively on the rehabilitation equipment and
supplies segment while others offer a wide array of
products to supply the full continuum of medical
specialties. Following is a list of leading distributors.
GNR Health Systems is a leading supplier of
physical therapy, rehabilitation and fitness products.
The Company sells over 3,000 products to more
than 10,000 customers worldwide via catalog and
Internet. www.gnr-inc.com
Invacare Corp. is a leading manufacturer and
distributor in the $8.0 billion worldwide market
for medical equipment used in the home. (The
home medical equipment market includes home
healthcare products, physical rehabilitation
products, and other non-disposable products
used for the recovery and long-term care of
patients). The Company designs, manufactures,
and distributes an extensive line of healthcare
products for the non-acute care environment,
including the home healthcare, retail, and extended
care markets. Invacare sells its products to over
25,000 home healthcare and medical equipment
providers, distributors and government entities in
the U.S., Australia, Canada, New Zealand and Asia.
Invacares products are sold through a worldwide
distribution network by its own sales force, telesales
associates, and independent manufacturers agents
and distributors. The company also distributes
medical equipment and disposable medical supplies
from other manufacturers.
Primary products areas are as follows: (1)
Rehabilitation products including custom power
and custom manual wheelchairs, seating and
positioning, and scooters; (2) Respiratory products
including oxygen systems, sleep apnea products,
and nebulizers; and (3) Standard products including
bath safety, walkers, wheelchairs, beds, and
therapeutic support surfaces. In 2009, Invacare
reported net sales of $1.693 billion with $748.4
million coming from North America. Invacare
employs about 5,900 persons.
www.invacare.com
MedcomDirect.com is a direct supplier of
specialized home rehabilitation equipment. The
Company was formed as a response to pressure
from insurance companies to find ways to lower
post-surgical rehabilitation costs. By shipping
equipment directly to a patients home, and
including clear concise instructions along with
24-hour telephone support, the rental pricing is
significantly reduced by eliminating the additional
labor costs of setting up and taking down of the
equipment. MedcomDirect offers foot pumps,
continuous passive motion (CPM) equipment,
sequential compression devices (SCD), and

cryotherapy (cold therapy coolers).
www.shophomehealth.com
Medical Supplies and Equipment
Company is a leading Internet sales company
with a wide range of rehabilitation equipment
and supplies including balance boards, cardio
equipment, weights, exercise balls, floor mats,
general exercise equipment, hand and finger
exercise equipment, tens units, hydotherapy and
electrotherapy equipment, hot and cold therapy,
aids to daily living, orthopedic devices, mobility
products and more. www.medical-suppliesequipment-company.com
Medline, Inc. is the largest privately-held
national manufacturer and distributor of health
care supplies and services in the U.S. The company
manufactures and distributes more than 100,000
medical products to the entire continuum of care,
including hospitals, extended care facilities, surgery
centers, commercial laundries, home care dealers,
home care agencies, physician offices and other
alternate care sites. In the area of physical therapy,
the companys product line includes electric therapy,
exercise equipment, fine motor skills therapy,
general activity equipment, measuring systems, step
therapy, ultrasound systems, and water therapy.
The company also offers a wide assortment of aids
to daily living, hot and cold therapy, orthopedic
soft-goods, scooters, walking aids, and wheel chairs
in its product line. Medline has ten manufacturing
facilities in North America and over 25 joint venture
manufacturing plants worldwide. In addition,
the company operates 34 distribution centers and
sells its products in all 50 states and more than 20
countries. Medline has more than 6,800 employees
in North America including a dedicated sales force
of 800 persons. www.medline.com
MedSource USA is a leading Internet supplier
of physical therapy, rehabilitation, physical fitness
equipment and supplies, and electrotherapy
equipment. The companys product line includes
aqua therapy, assessment and evaluation,
assisted living aids, CPM, educational products,
electrotherapy, exercise therapy products, fitness
equipment, hot and cold therapy, hydrotherapy,
orthopedic braces and supports, physical therapy
supplies, Pilates equipment, traction equipment and
treatment tables. www.medsourceusa.com
Patterson Medical, operating as Sammons
Preston in the U.S., is the worlds leading distributor
of rehabilitation supplies and non-wheelchair
assistive patient products to the physical and
occupational therapy markets. The company
has an estimated market share of 10% of the
rehabilitation and assistive products market it serves.
The company manufactures, or has exclusively
manufactured for it, about 25% (by revenue) of the
30,000 products it distributes, and purchases the
remaining 75% from more than 2,000 suppliers
64
and manufacturers. Patterson Medical offers the

industrys largest and most comprehensive range
of distributed and self-manufactured rehabilitation
products to a global customer base serving hospitals,
long-term care facilities, clinics and dealers. In
2009, the company reported sales of $369 million
of which 85% came from the U.S.
www.patterson-medical.com
ProMed Products Xpress offers Internet
and catalog sales of a wide range of rehabilitation
equipment and supplies including home gyms
and commercial fitness equipment, exercise balls,
exercise bikes, tens units, therabands, heart rate
monitors, massage and inversion tables, massagers,
hydotherapy and electrotherapy equipment, balance
boards, mini trampolines, hot and cold therapy, aids
to daily living, orthopedic devices, mobility products
and more. www.promedxpress.com
Tartan Group is a leading Internet supplier of
physical therapy, rehabilitation and electrotherapy
equipment. The Company offers an extensive
line of rehabilitation fitness equipment, exercise
products, modalities, hot and cold therapy products,
clinical furniture, clinical supplies, mobility
products, traction equipment, and much more.
The companys primary customers groups include
the physical therapy, occupational therapy, sports
medicine and chiropractic markets.
WisdomKing.com claims to be the largest
physical therapy online store providing a wide
variety of physical therapy supplies, equipment,
and rehabilitation products. Product areas include
mobility equipment, exercise equipment, orthopedic
supplies and home care supplies.
www.wisdomking.com
9.3. LEADING CUSTOMER GROUPS
The physical and occupational therapy business
segments of the healthcare industry are highly
competitive and are constantly experiencing
change in the manner in which the services are
delivered and the providers selected. Generally,
hospitals compete for service contracts with group
healthcare services purchasers on the basis of price,
market reputation, geographic location, quality
and range of services, quality of the medical staff,
and convenience. Consolidation in the industry is
already taking place and is expected to continue in
the near future. The consolidation is being driven
by companies seeking to offer a competitive mix of
the above mentioned criteria and to be present in
more local markets and closer to patients. Following
is a list of some of the leading inpatient and
outpatient physical rehabilitation service providers
in the U.S.
Centerre Healthcare, Inc. is a national
provider of inpatient acute rehabilitation services.
The company is focused on partnering with
medical centers that want to complement their
healthcare continuum through joint development
and operation of acute rehabilitation hospitals.
Centerre Healthcare provides both inpatient and

outpatient rehabilitation services including nursing
care, physical therapy, occupational therapy, speech
pathology, and related services.
www.centerrehc.com
HCA, Inc. is one of the leading healthcare
services companies in the U.S. The company
operates 163 hospitals which include diagnostic and
imaging centers; radiation and oncology therapy
centers; comprehensive rehabilitation and physical
therapy centers; and various other facilities. HCAs
acute care hospitals also provide outpatient services
such as outpatient surgery, laboratory, radiology,
respiratory therapy, cardiology and physical therapy.
In addition, HCA operates 105 freestanding surgery
centers. HCAs facilities are located in 20 states
and England. In 2009, HCA reported net revenue
of $30.52 billion and employed 190,000 persons.
www.hcahealthcare.com
HealthSouth is the largest provider of inpatient
rehabilitation services in the U.S. The company
operates 93 freestanding inpatient rehabilitation
facilities, 6 long-term acute care hospitals, 40
outpatient rehabilitation satellites (operated by its
hospitals), and 25 licensed, hospital-based home
health agencies. HealthSouth provides treatment
on both an inpatient and outpatient basis. The
companys inpatient facilities are located in 26
states, with a concentration of facilities in Texas,
Pennsylvania, Florida, Tennessee, Alabama, and
Arizona. HealthSouth inpatient rehabilitation
hospitals offer specialized rehabilitative care across
a wide range of diagnoses. HealthSouth hospitals
also offer outpatient therapy with services available
at the hospital or at a nearby freestanding clinic. Its
40 outpatient rehabilitation satellites treat people
of all ages and offer specialized rehabilitation
programs for pediatric, adolescent, adult and
geriatric populations. Services offered include:
physical therapy, occupational therapy, sports
medicine, general orthopedics, aquatic therapy,
industrial and work programs, and also specialized
rehabilitation programs. HealthSouth's long-term
acute care hospitals specialize in managing the
complex medical care and rehabilitation of patients
with multiple acute healthcare needs. In 2009 the
company reported net revenue of $1.911 billion
and employed 22,000 persons.
www.healthsouth.com
Horizon Health Corp. is a leading privately
held provider of acute rehabilitation services. In
addition to acute inpatient rehabilitation services,
Horizon Health also provides hospital therapy
services, inpatient sub-acute care, a skilled nursing
unit, and outpatient therapy services.
www.horizonhealth.com
Kindred Healthcare, Inc. (KHI) is a
leading national healthcare services company.
The Company operates 83 long-term acute care
hospitals in 24 states, 222 nursing centers in 27
65
states, and also a contract rehabilitation services

business. KHIs rehabilitation division provides
rehabilitation services primarily in long-term care
facilities, but also in hospitals, school districts,
outpatient clinics, home health agencies, assisted
living facilities and hospice providers. KHI provides
services to 478 nursing centers, 89 hospitals and
55 other locations in 41 states under the name
Peoplefirst Rehabilitation. The rehabilitation
division employs over 8,100 therapists and had
revenues of approximately $475 million in 2009.
KHI reported total consolidated revenue of $4.270
billion in 2009. www.kindredhealthcare.com
Physiotherapy Associates (PA) is a privately
held company and is one of the leading outpatient
physical therapy providers in the U.S. PA is the
only national provider solely dedicated to outpatient
rehabilitation and orthotic and prosthetic services.
Main areas of treatment include: neck/back
disorders, hip and knee conditions, foot/ankle
injuries, sprains/strains, sports and automobile
injuries, shoulder pain, arthritis, stroke, hand/
upper extremity disorders, carpal tunnel syndrome,
tennis elbow, vestibular disorders, and neurological
conditions. The company is made up of hundreds
of individual clinics across the country with more
than 600 locations throughout more than 30
states. Some of the names they operate under are
as follows: Physiotherapy Associates, Keystone
Rehabilitation Systems, Integrity Physical Therapy,
Matrix Rehabilitation, Rehab Associates, Banyan
Tree Rehabilitation, VBS Physical Therapy,
Progressive Sports Medicine, The Rehab Center,
Champion Sports Medicine, Patriot Sports
Medicine, and Start Physical Therapy.
www.physiocorp.com
RehabCare Group is a leading provider of
physical rehabilitation program management
services in over 1,260 hospitals, nursing homes and
other long-term care facilities in 41 states. The
Company also owns and operates 6 freestanding
rehabilitation and 28 long-term acute care hospitals.
RehabCare Group reported approximately $869
million net operating revenue in 2009.
www.rehabcare.com
Select Medical Corp. (SMC) is a leading
provider of specialty healthcare services. The
Company operates 89 long-term acute care
hospitals in 25 states, 959 outpatient rehabilitation
centers in 36 states, and 6 medical rehabilitation
hospitals in 4 states. SMC also provides medical
rehabilitation services on a contract basis at more
than 400 locations including nursing homes,
hospitals, assisted living and senior care centers,
schools, private homes and worksites. SMCs
core services include physical therapy, hand/
occupational therapy, low back rehabilitation,
work injury prevention and management, sports
performance and athletic training services. SMCs
outpatient centers operate under several well known
brand names, including NovaCare Rehabilitation,
Kentucky Orthopedic Rehab Team, Sports &

Orthopedic Rehabilitation Services, and Kessler
Rehabilitation Centers. In 2009, SMC reported
net revenues of $2.240 billion with $1.558 billion
coming from its specialty hospital division and $682
million coming from its outpatient rehabilitation
division. SMC employs over 22,500 persons.
http://www.selectmedicalcorp.com
Tenet Healthcare Corp. is a leading healthcare
services company in the U.S. The company
operates 50 general hospitals in 12 states as well
as a critical access hospital, a long-term acute
care hospital, and a number of medical office
buildingseach of which is located on the same
campus as, or nearby, one of its general hospitals.
In addition, Tenet operates various other ancillary
healthcare businesses, including outpatient surgery
centers, diagnostic imaging centers, occupational
and rural healthcare clinics, and interests in a health
maintenance organization. In 2009, Tenet reported
net revenue of $9.014 billion and employed 57,613
persons. www.tenethealth.com
The U.S. Department of Veterans Affairs
(VA) is the federal agency responsible for providing
benefits to U.S. veterans and their families. The
VAs healthcare system includes 153 medical centers
(with at least one in each state, Puerto Rico and the
District of Columbia) plus 768 community-based
outpatient clinics, 134 community living centers,
50 residential rehabilitation centers, 232 Veterans
Centers, and 6 independent output clinics. These
facilities provide a broad range of medical, surgical
and rehabilitative care. Approximately 74.5 million
persons are potentially eligible for VA benefits and
services because they are veterans, family members,
or survivors of veterans. The VAs fiscal year 2009
budget obligations are estimated to be $104.7
billion, including $45.5 billion for healthcare, $45.9
billion for benefits, and $640 million for the national
cemetery system. http://www.va.gov/
U.S. Physical Therapy is a leading national
provider of rehabilitation services. The company
operates 368 outpatient physical and occupational
therapy clinics in 43 states across the U.S. The
companys clinics provide post-operative care
for a variety of orthopedic-related disorders and
sports-related injuries, treatment for neurologicallyrelated injuries, rehabilitation of injured workers
and preventative care. In addition to owning
and operating clinics, the company manages 13
physical therapy facilities for third parties, including
physician groups. In 2009, U.S. Physical Therapy
reported net revenue of $201.4 million and
employed 2,132 persons. http://www.usph.com/
index.asp
66
10. Dental
(CMS) estimates that U.S. expenditures for Dental
Services were valued at $102.2 billion or about
4.1% of total national health expenditures in
2009. CMS forecasts the total amount spent on
dental services will grow to $145.2 billion in 2015,
an increase of about 6.0% per year. Since older
patients spend more for dental services, especially
for implantology, aging is the major long-term
driver; however the demand for functional and
aesthetic dental services has been increasing for
patients of all ages. Continued technological
developments, especially digitalization, will also
help propel growth, as will the increasing demand
for preventive dentistry or specialty services such as
endodontic, orthodontic or periodontic procedures.
Finally, the combination of private or patient pay
and increased coverage by dental insurance plans
will tend to increase demand for dental services as
the economy improves.
The dental market is highly diversified and
segmented into the following categories: prevention,
regenerative dentistry, restorative dentistry, and
implant dentistry. Products for all segments are
differentiated as consumables, materials, which
includes implants, and equipment. Unlike other
medical technology markets, dental products are
not sold primarily to hospitals, but to office based
practitioners. Due to the large number of dental
clinics and laboratories, distributors are a crucial
component of the North American dental market.
The two large U.S.-distributors and numerous
regional full-service and local dealers play a major
role in the marketing of consumables, materials and
equipment. They also act as consultants to dentists,
providing office design assistance, equipment
financing, and many other value-added services.
The dental market declined in 2009 and only
partially rebounded in 2010. Due to the signficant
economic downturn, the market experienced a
reduction in patient demand as dentists and dental
laboratories reduced their purchases of equipment
and supplies to compensate for the loss in business.
The market contraction was also felt in the area
of dental materials. According to GlobalData, the
dental device market in the U.S. had an estimated
value of $2.4 billion in 2010. The market is
expected to eventually recover and is forecasted to
grow at a rate of 7.3% per year to just under $3.2
billion in 2014.74 While the dental consumable
market stayed flat in 2010, the high tech end of the
equipment market declined to pre-recession levels.
Implant sales only started to increase again in the
last quarter of 2010.
GlobalData excludes consumables and divides the

U.S. dental technology market into six primary
segments: (1) crowns and bridges; (2) dental chairs
and equipment; (3) dental implants; (4) dental lasers;
(5) dental biomaterials; and (6) dental radiology
equipment.
The dental implants market is the largest segment
of the dental technology market, and had an
estimated value of $2.9 billion globally and
approximately $900 million in the U.S. in 2010.
From 2003 to 2008, the U.S. market was growing
at a rate of over 18 percent per year and was
previously forecast to reach $1.2 billion in 2013,
but the economic recession began to significantly
affect sales starting in the 4th quarter of 2008.
As the slowing economy increasingly impacted
the personal incomes of a growing number of
Americans, many consumers turned to lower cost
alternatives such as dental bridges. As a result,
overall growth in the implant segment fell to about
7.2 percent in 2008.75 GlobalData expects the
annual growth rate in the dental implants market
will be about 6.3 percent per year through 2014
because dental implants are in the category of
optional surgery and represent the type ofconsumer
spending that is postponed during economic
downturns. In addition, results from a sruvey by
the National Association of Dental Plans indicate
most insurance plans that include coverage for
implants treat the service as a Tier III option, which
often includes a 50% co-payment and an annual
or lifetime maximum coverage amount. In light
of these provisions the dental implants market is
forecast to reach a market value of just over $1.0
billion in 2014.
Nevertheless, implant dentistry is increasingly
becoming the standard of care. Compared to other
developed markets the implant penetration rate in
the United States is well below average.
Dental implantology is closely linked to digital
restorative dentistry and CAD/CAM prosthetics
and as a result the leading implant companies have
invested heavily in adjacent markets with the goal
of displacing conventional treatment techniques.
Next to CAD/CAM crowns or bridges, implant
companies typically offer membranes, biomaterials
for bone augmentation and other regenerative
products. Given these more complete product
portfolios, the implant market, which comprises
implants, abutments and instruments, becomes
more difficult to assess. While Straumann claims to
have become the global market leader, Nobel
67
Biocare still dominates the U.S. implant market

with an estimated share of 22%. Based on the
same segment calculations, Straumann holds 16%,
Zimmer 12%, Biomet 11%, Dentsply and Astra
Tech 7%. BioHorizons, a dental implant company
established in 1995, holds approximately 5% of the
U.S. market. Implant Direct, acquired by Sybron/
Danaher in 2010, appears to have a similar market
share. Eighty percent of dental implants were sold
to clinics and 20% to hospitals in 2010.
The dental chair and equipment market is the
second largest segment of the dental device market.
This segment includes dental chairs, hand pieces,
scaling units, and light curing equipment. The
overall segment had a market value of $701 million
in 2010 and is expected to grow to $923 million in
2014. This market segment is highly concentrated;
the top five competitors comprised 88% of the
market in 2009. A-dec, Inc. is by far the market
leader with a market share of 46.9% followed by
Pelton & Crane with 18.3%, Kavo Dental 11.5%,
Midmark Corp. 7.1%, and Planmeca Oy 4.1%.
Sixty-five percent of dental chairs and equipment

was sold to clinics and 35% to hospitals in 2010.
The dental radiology market is the third largest
segment of the dental device market and is
projected to grow at a rate of 8.4% per year from
$551 million in 2010 to $760 million in 2014. This
segment includes both extra-oral and intra-oral
radiology equipment. The extra-oral sub-segment
is forecast to grow from $449 million in 2010
to $620 million in 2014 and the intra-oral subsegment is projected to grow from $101 million
to $140 million. Following the acquisitions of
Danaher in the last decade this market segment is
highly consolidated. In 2009, the top five brands
comprised 77.3% of the market. Planmeca Oy is
the market leader with 29% market share, followed
by Instrumentarium Dental with 18%, Gendex
Dental Systems with 10.5%, Carestream Health
with 10% and Sirona Dental Systems with 9.8%.
Seventy percent of dental radiology equipment was
sold to clinics and 30% to hospitals in 2010.
Figure 49 U.S. Dental Device Market, Projected Demand in $Millions (2010-2014)

Item
2010
2011
2012
2013
2014
2010-2014
(CAGR %)
Crowns and Bridges
113
122
133
144
156
8.4
Ceramic Fused to Metal
85
92
100
108
117
8.3
Metal Free Ceramic
28
30
33
36
39
8.6
Dental Chairs and Equipment
701
751
804
862
923
7.1
Dental Chairs
457
491
528
567
610
7.5
Hand Pieces
207
220
243
248
264
6.3
Scaling Units
15
16
17
19
20
7.5
Light Cure Equipment
22
24
26
28
30
8.1
Dental Implants
852
906
963
1,023
1,088
6.3
Titanium Dental Implants
850
904
961
1,021
1,085
6.3
Zirconium Dental Implants
0.0
Dental Lasers
39
42
46
49
54
8.5
Dental Biomaterials
147
160
173
189
205
8.7
Dental Bone Graft Substitutes
18
20
22
24
27
10.7
Dental Bone Grafts
70
77
85
94
103
10.1
Tissue Regenerative Materials
59
62
66
71
74
5.8
Dental Radiology Equipment
551
597
647
701
760
8.4
Extra Oral Radiology Equipment
449
487
528
572
620
8.4
Intra Oral Radiology Equipment
101
110
119
129
140
8.5
Total
2,402
2,577
2,765
2,967
3,184
7.3
Source: GlobalData , February 9, 2011
68
From approximately 2000 to 2005, the dental market went through a period of transition as the focus of
services shifted from conventional repair and restoration to prevention. During that time, the American
Dental Association reported a 51.7% decrease in metal amalgams (fillings), a 5.7% reduction in plastic
restorations, and 41.2% fewer extractions. In addition, periodic oral exams increased by 12.1% as
consumer demand for preventive dental care was on the rise and insurance covered more preventive
treatment. However, following the recent global recession and continued slow economic conditions in
the U.S., procedure volumes have decreased from previous years. In 2007, the number of procedures per
visit was estimated at 3.9 versus 2.7 in 2009. Also, even though the demand for diagnostic and preventive
services remains the largest segment of the market, its rate of growth has slowed while the demand for
repair and restorative procedures has remained steady. The following table shows the demand for repair
and restorative services for patients is forecast to increase about 2.4 % per year whereas demand for
diagnostic and preventive services will increase only about 1.9% per year through 2013. Previously the
demand for diagnostic and preventive services was growing at a rate of about 2.8% per year.
Figure 50 Projected Dental Patient Activity & Procedures 2009-2013 (in $ Millions)
2009
2010
2011
2012
2013
AAGR
1,618
1,653
1,688
1,725
1,766
2.2%
Diagnostic & Preventative
1,059
1,079
1,099
1,120
1,144
1.9%
Repair and Restorative
493
505
517
530
543
2.4%
Cosmetic
11
12
12
13
14
6.2%
Other
54
57
59
62
65
4.7%
Procedures/visit
2.7
2.7
2.8
2.9
2.9
1.8%
Dental Visits
533
556
580
605
614
3.6%
(2009-2013)
Dental Procedures
Source: Based on Freedonia Group, Inc: Dental Products & Materials, March 1, 2008
It must be stressed that the single most important

factor bringing patients to dentists is insurance
coverage. Dental insurance coverage for Americans
has risen considerably over the years and it is
estimated that more than 152 million Americans are
currently covered while 143 million have no dental
coverage. It is also estimated that of the 172 million
Americans under 65 years of age with health
insurance, 73 percent have dental insurance. The
National Association of Dental Plans states that
people with dental insurance are 49 percent more
likely to have visited the dentist for a checkup or
cleaning in the previous six months, and 42 percent
more likely to take their children to the dentist twice
a year than persons who do not have coverage.76
Even so, persons covered by dental insurance pay
a larger percentage of the cost for dental services
themselves compared with the amount they pay for
services covered by health insurance. For example,
in 2009, patients paid about 41.6 percent of dental
bills themselves compared with 9.5 percent for
physician services, 3.2 percent for hospital care, and
29.0 percent for nursing home care. This being the

case, the demand for dental services is more elastic
during economic downturns than the demand for
medical services because consumers must use more
discretionary income. Also, dental reimbursement
levels tend to decrease as the level of complication
(and expense) increases, and they are usually capped
at around $1,200-$1,500 per year.
Another trend affecting the dental industry is a
projected decrease in the number of dentists. There
are approximately 233,000 dentists located in the
U.S. compared to 270,000 in Europe and 97,000
in Japan. However, the trend in the U.S. suggests
that by 2020 there will be fewer dentists per 100,000
inhabitants despite an increase in demand for dental
services (see Figure 51). Therefore, it is foreseen
that a "squeeze" on the dental providers will take
place in the near future which will put pressure on
both dentists and manufacturers to develop more
efficient and productivity-enhancing products.
Figure 51 U.S. Dentists per 100,000 Inhabitants 2000 and 2020

66
64
63.6
62
60
58
57.2
56
54
2000
2020
Source: Angela Chou, Montana Office of Rural Health http://healthinfo.montana.edu/Workforce%20Summary.doc
69
With this in mind and in combination with Figure

50, after a sharp decline, productivity is once again
slowly starting to increase as we see procedures per
dentist visit rising. In 2009, there was an average
of 2.7 procedures per visit. However, by 2013
the number of procedures per visit is projected to
increase to 2.9 and the number is expected to rise
further to 3.0 by 2015.
The Dental Lab Market
Dental laboratories produce dental consumables
for dentists and their patients. Products include
ceramic replacement teeth, crowns, bridges,
and porcelain inlays among others. Dental labs
are responsible for 1015 percent of the total
dental market. The dental laboratory business
is segmented and geographically focused with
approximately 12,000 labs in North America
compared to 43,000 in Europe. Usually dental labs
service dentists in their region and rarely market
themselves outside of a geographical region. The
laboratories depend on the dentist to supply the
ultimate consumer, or patient, and are evaluated by
delivery time and consistent quality of the outcome.
As a response to increasing patient demand for
dental implants, more labs are shifting from
traditional crown and bridge products to offer highend implant planning. An increasing number of
labs are investing in cutting-edge innovations such
as 3D cone beam volumetric computed tomography
(CBVCT) and interdisciplinary treatment planning
software applications which enable them to boost
their involvement in each individual step of clinical
implant treatment. These labs are now able to
plan the case from beginning to end for the doctor
and provide the doctor with actual case planning,
treatment planning, design, and the final crown or
bridge77. As a result, 91% of labs that responded to
a July 2009 Dental Lab Products survey stated they
offer implant services, 84% stated they consider
themselves part of an implant restorative team,
86% have experienced growth in implant business
over the past 5 years, and 68% have experienced
growth in implant business over the past year.78
more frequently used for posterior cases and allceramic materials for anterior cases. Interestingly,
the decision process for choosing the material and
technique provides great insight into how dentists
make their decisions. Personal clinical experience
is a key driver in the decision to perform certain
techniques in dentistry, therefore education and
marketing can be instrumental in changing dentists
choice of procedures.
Recent trends show that the materials of choice are
starting to change. Materials manufacturers have
made significant progress in developing composite
materials that look natural, have improved wear,
and last longer. Progress has been made in small
steps that have added to longer stability and
usefulness of restorations. The introduction of
nanotechnology advancements has created a new
generation of composites with improved aesthetics,
increased translucency and vitality, better wear,
and reduced shrinkage. The significantly improved
composite materials combined with increased
patient demand for esthetics has caused many
dentists to switch away from using amalgam. A
survey in the March 2008 Dental Products Report
states that about 80% of dentists are using at least
one of the newer generation nano-composites. Of
those dentists still using amalgam, 81% placed fewer
than they did three years ago. The 2008 DPR
survey also stated that 57% of the respondents still
use amalgam, while 43% do not.79
Patient Education
Dentists are making an extra effort to educate
their patients about oral healthcare and treatment
options. An August 2008 Dental Products Report
survey showed that 35% of dentists are spending
11-25% of their chair time with patients for
education. This extra patient education has
been shown to improve patientsacceptance of
procedures by as much as 80%. In many cases,
even patients who initially said no to the
treatment come back several months or even years
later requesting the treatment they had seen in a
patient education presentation.80
Materials
One of the most prevalent and costly consumables
in the dental industry is the material that is used
for tooth restoration. Dentists and dental labs
that perform restoration procedures traditionally
use metal materials (such as gold), ceramic, or
porcelain-fused-to-metal (PFM). Ease of use
and longevity are the primary drivers in the use
of PFM implants. Although PFM products and
metal restoration dominate the market, metal-free
products are on the rise. For example, porcelain
veneers/laminates are used by over two-thirds of
dentists and lab clinicians, and metal free crowns by
over half. In addition, the use of all ceramic CAD/
CAM crowns and bridges is starting to be used
more frequently. Because aesthetics are a concern,
the location in the mouth plays a key role in the
choice of restorative materials. PFM materials are
The increased use of computers in the treatment

room is also helping with patient education. Chair
side monitors enable patients to see before and after
pictures, and touch screen monitors allow patients
to watch as the dentist marks their x-ray or draws
example treatment options.It is important to note
that although the use of DVD interactive programs
is on the rise, brochures are still the method most
used by dentists to educate their patients. Seventythree percent use brochures; 66% use models of
dentition, gingival, or restorations; 40% use before
and after photo albums; 30% use practice website
and/or intra oral camera tours of the patients
mouth; and 27% use DVD interactive programs.
Sixty-seven percent of printed patient education
materials come from manufacturers while 33% is
produced in-house by dentists.
70
Other Dental Market Trends

Other market trends in the dental industry indicate
that many dentists plan to invest in new cuttingedge technologies despite the economic recession.
In a 2010 Dental Products Report survey, 48%
of the responding dentists stated they are more
cautious, but are still spending on necessary items,
while 13% stated the economy has not changed
their purchasing and investment plans. Fiftyseven percent of the respondents said they plan
to purchase new technology (digital radiography,
lasers, computers, etc.) in the next 12 months,
while 53% plan to purchase new materials. About
one out of four indicated they will purchase new
equipment (delivery systems, operatory cabinets,
lights) in the next year. In addition, the survey also
showed that there is a fairly widespread adoption
of core digital technologies and that an increasing
numbers of dentists are using bigger-ticket and
specialized technologies. Fifty-eight percent of
dentists already own digital radiography systems
and another 21% intend to purchase. However,
only about 7% of dentists offer cone beam imaging
technology in their practice primarily because of
the high cost of the equipment.
10.2. MAJOR DENTAL
MARKET PARTICIPANTS
Consolidation is taking place in the U.S. dental
industry. New entrants and minor players,
however, play a significant role in a market that is
changing rapidly, with advances in digitalization
and changes in practice management. Given the
large number of office practitioners, large and midsize wholesalers play a major role in this industry,
often organized as a one-stop-shop for the dentist.
Implants and large equipment often are sold
through direct sales personnel.
A-dec is a leading dental equipment company
headquartered in Newberg, Oregon. The product
portfolio of the company includes dental chairs,
cabinets, lights, hand pieces and small equipment.
In the United States, the products are sold through
dealers as Patterson, Benco Dental, and others.
Global Data estimates that A-dec is the leader in the
North American chairs and equipment market with
sales of approximately $350 million.www.a-dec.com
Astra Tech is a subsidiary of AstraZeneca,
Inc. Besides medical devices the company
manufactures and markets an extensive line of
dental implants, abutments and related items as
well as medical devices in the fields of urology
and surgery. Astra Tech has reported worldwide
net sales of $535 million in 2010 with an increase
of 22% in the United States. We estimate that
U.S. dental sales have reached approximately $75
million. AstraZeneca is seeking to sell its Astra Tech
subsidiary for $2 billion. www.astratech.com
Benco Dental is a privately owned distributor
of dental products serving 40 states and 30,000
customers. The company is headquartered

in Pittston, PA. Benco Dental distributes a
comprehensive portfolio of consumables and
equipment and provides many services to dental
practitioners. We estimate that the Benco Dental
has annual sales of approximately $200 million.
www.benco.com
Biomet 3i is a subsidiary of Biomet, Inc.
and is one of the leading companies in the oral
reconstruction market. The company offers an
extensive line of implants, abutments and related
items as well as a growing line of site preparation
and regenerative products. Biomet 3i has its
headquarters in Palm Beach Gardens, Florida and
has operations throughout the world. In 2010,
Biomet reported a 2% decline in its dental implant
sales. We estimate that Biomet 3i had U.S. sales of
approximately $110 million in its last fiscal year.
www.biomet3i.com
Danaher is a Delaware technology corporation
that has acquired a significant group of companies
in the dental industry. The corporation entered
the dental market in 2004 with the acquisition of
Kavo and Gendex. Sybron Dental Specialties was
acquired in 2006, PaloDEx in 2009, and Implant
Direct through Sybron - in 2010. The dental
business segment of Danaher reported 2010 sales
of $1,824.6 million, an increase of 10% compared
to the previous year. While sales of dentistry
consumables were reported to be flat, equipment
sales, especially in imaging, moved back to pre
recession levels. Danaher now has the power to
bundle its many brands and to actively sell its
products in North America through distributors as
Henry Schein. www.danaher.com
Dentsply is the largest company in the
dental market in terms of development and
manufactuirng, with a primary focus on dental
consumables (35% of sales), dental laboratory
products (16% of sales) and dental specialty
products (46% of sales). In 2010, Henry Schein
accounted for 11% of Dentsply consolidate sales.
Dentsply reported global sales of $2.22 billion, an
increase of 2.9% compared to 2009. In the United
States, sales remained flat at $841 million.
www.dentsply.com
Henry Schein is the largest distributor of
healthcare products to office-based practitioners. As
other dental distributors, the company emphasizes
its full service capabilities to dental practitioners. In
2010, the company reported sales of $2.678 billion
in the segment of dental consumables, laboratory
products and equipment. Dental sales increased
by 6.7% with a significantly higher growth rate in
the sub-segment of consumables versus equipment.
After an initial investment of 50.1% in Camlog in
2004, Henry Schein acquired the remaining interest
in the implant company in 2010.
www.henryschein.com
71
Ivoclar Vivadent is a privately owned company

which prides itself on having one of the largest
research and development centers in the dental
industry. The company holds a strong position in
the restorative segment and continuously launches
products to optimize routine dental procedures.
With CAD/CAM blocks, Ivoclar Vivadent
participates in the attractive materials market of
digitalized dentistry. We estimate that the company
will report global sales of approximately $600
million. In North America, the company sells its
products through distributors as Henry Schein,
Patterson and others. www.ivoclarvivadent.com
3M Espe is the dental division of 3M Healthcare.
The company claims to be a highly innovative
provider of consumables, implants, and digital
technology. In 2010, 3M Healthcare reported
global sales of $4,521 million, an increase of 4%
excluding acquisitions. In the United States, 3M
Espe sells its products directly or through various
distribution channels including large and small
distributors. www.3mespe.com
Nobel Biocare is headquartered in Zrich,
Switzerland and is the world leader in restorative
aesthetic dental solutions. In 2010, the company
suffered a decline in sales to $764 million (-6.4%).
In North America, sales declined by 5.8% (constant
exchange rates) to $257 million with the most
significant decline in the fourth quarter. The
company attributes the decline to changes in the
organization and some loss of market share.
www.nobelbiocare.com
Patterson Companies, Inc. is one of the two
largest dental distributors in North America. The
company, headquartered in St. Paul, MN, offers a
complete range of consumables, equipment and
software. With 1,500 sales representatives and
nearly 100 branches in North America, Patterson
dental claims a market share of 32%. In the fiscal
year ended April 24, 2010 the company reported
dental sales of $2,167.5 million, a decrease of 0.3%
compared to 2009. Consumables account for 56%
and equipment for 33% of dental sales. Patterson
dental has an exclusive distribution agreement with
Sirona Dental Systems for Cerec and Schick.
www.pattersondental.com
Sirona is a dental equipment company producing
treatment centers, imaging systems and dental
CAD/CAM systems. With Cerec, the company
has pioneered the digital age in dentistry. In the
fiscal year 2010, ended on Sept 30th, the company
reported global sales of $770 million. In the
United States, sales were especially driven by
imaging and CAD/CAM and increased by 8.3%
to $239.5 million. Sironas primary distributors in
the United States are Patterson and Henry Schein.
They account for 30% and 15% of total sales,
respectively. www.sirona.com
Straumann is headquartered in Basel,

Switzerland and is a global leader in implant and
restorative dentistry and oral tissue regeneration.
The company reported an increase in sales of
4.6% at constant exchange rates to $709 million.
In North America, sales increased 8.7% to $158
million. Straumann attributes its market share
gain in the United States to a stable sales team
and growing sales of its bone level implant and its
allograft. www.straumann.com
Young Innovations, Inc. offers a range of
consumables, especially prophy angles, and
equipment. The company has manufacturing and
distribution facilities in Missouri, Illinois, California,
Indiana, Texas, Wisconsin and Ireland. In 2010,
Young reported sales of $102.8 million, an increase
of 5.2% compared to the prior year. www.yiinc.com
10.3. MARKET OUTLOOK
AND INDUSTRY TRENDS
After the end of recession, most dental companies
experienced only a slow recovery in 2010. Patient
demand for dental services remained uneven, sales
of general dentistry consumables was very slow,
and practitioners seemed reluctant to commit to
new capital investments for traditional equipment.
In comparison, dentists have been committed
to increasing their productivity and companies
generally reported significantly higher sales in
the high-tech segment of the market, such as 3D
equipment, intra oral cameras or CAD/CAM
technology. Despite the prevelance of private pay,
the trend towards implantology slowly seems to
be improving in the United States. Prevention,
aesthetic dentistry and specialty procedures such as
endodontics are additional growth drivers.
Mergers and acquisitions did not significantly
impact the dental industry in 2010. Danaher,
the conglomerate who has acquired major dental
brands since 2004, only made a minor move by
acquiring Implant Direct through its Sybron entity.
Implant Direct sells look-alike implants through
the Internet. Another minor deal involved Discus
Dental who was acquired by Philips Healthcare,
a new conglomerate entering the dental market.
AstraZeneca on the other hand invited bids for
the sale of its dental unit Astra Tech. A major
trend in the larger medical technology industry
the protection of bone and soft tissue is also
evident in the dental market. As in orthopedics,
soft tissue and bone regeneration are major areas
for innovation. Unique to dentistry is the need
for membranes specific to bone augmentation and
periodontal tissue regeneration. Also, the increased
desire for aesthetics and a greater emphasis on
prevention is particular to dentistry. Technological
advancements, especially digitization have and will
continue to change the mode of delivery of dental
procedures, both conventional tooth and implant
restorations.
72
CAD/CAM produced ceramic restorations,

whether in-office, laboratory or centrally made,
represent a growing portion of the market. Digital
workflows are replacing multistage processes of
manual impressions, pouring a model, waxing up
a coping, casting the coping, applying an opaque
layer, hand stack dentin and enamel porcelains,
stain and glaze a restoration. Sirona estimates
that the market penetration for in-office CAD/
CAM systems in the United States has grown to
approximately 11% and will continue to increase
substantially.81 The benefits of digital workflows are
not only seen in reducing risks of error or higher
productivity but in lower treatment cost and higher
comfort for patients. While technology such as
femtosecond lasers82 or the integration of CT-scans
into the digital workflow for a 3D virtual patient83
offers additional possibilities, the economics of
dental practices or dental laboratories clearly
restrict investments without acceptable (short)
payback periods.
The significant costs for the patient currently
limits the growth of implant dentistry despite
the fact that the technology is well documented
with long term clinical data and the number of
implant specialists is increasing. New generation
products offering superior clinical results in terms
of integration, aesthetic outcome, ease of use or
added value for customers and patients will add

to their growing acceptance and should reposition
dental implantology for future growth. Growth in
the CAD/CAM prosthetics market should follow
the increase in the installed CAD/CAM equipment
base ultimately displacing conventional materials
and consumables products.
The U.S. dental market for Swiss companies
Unlike other medical technology segments in the
United States, sales and distribution to customers
of dental products, both dentists and dental
laboratories, is firmly in the hands of nationwide,
regional or local dealers. Only implants are usually
sold directly to the implant specialists. For Swiss
companies interested in the North American dental
market, distributors must be the conduit through
which they access the market. Most distributors
carry a large number of competing products but
they will always be interested in improved materials
or a superior product for their customers.
Entering the U.S. market with your own sales
representatives is costly and time consuming. The
limited turnover per account in dentistry should
be carefully evaluated and compared to the many
advantages of direct interaction with customers.
11. Drug-device
combination products
Frank Ustar, Trade Commissioner, Swiss Business Hub USA
11.1. DEFINITION
AND PRODUCT CATEGORIES
According to the U.S. Code of Federal regulations
(21CFR part 3.2.e), combination products are
defined as consisting of two or more regulated
components (e.g. drug/device, biologic/device, drug/
biologic or drug/device/biologic) that are physically,
chemically, or otherwise combined or mixed and
produced as a single entity. The importance of this
emerging product category was underscored by the
creation of the Office of Combination Products
(OCP) within the FDA in 2002.
The above definition indicates that pharmaceutical,
biotechnology, nanotechnology, and mechanical/
electronic manufacturing processes may be involved
in some combination in the final product. Such
medical products are becoming increasingly
important by:
providing innovative ways to extend lifecycles of
existing products for manufacturers
reducing the level of toxicity in patients
allowing for fewer side effects for patients
showing a higher rate of efficiency

enhancing patient compliance
The technological market driver for this type of
product is the ability to develop treatments which
are increasingly personalized as compared to mass
market medications or devices.
Product categories
Combination products may include drug-delivery
systems, gene therapy systems, personalized
medicine drugs, biological-device combinations,
nanotechnology, and other innovative products
for diagnostic and therapeutic treatments of
cardiovascular, metabolic, oncologic, and other
disorders.
Traditional drug-delivery systems combine
or package drugs together with injection devices
to improve convenience of administration. This
includes prefilled syringes, pen-based delivery
systems, drug pumps, and auto injectors. Because
the drug-device interface is relatively simple in
these products, the components can be developed
73
separately and then integrated during later stages of

their development cycles. These components can
also be regulated separately using the established
regulatory regimes for drugs and devices.
Novel drug-delivery systems (e.g., patches,
transdermal or intradermal injections, inhalation
devices, sprays, and drug-eluting disks) typically
combine existing drugs with new delivery devices.
These are designed to improve convenience
and comfort of administration, improve drug
effectiveness through localized administration, or
enable delivery of a drug through a nontraditional
route (other than oral or subcutaneous and
intramuscular injections). Although the complexity
of these products is typically moderate, changes
to administration, drug formulation, and
bioavailability can complicate the technology
of drug development. Because their primary
therapeutic mode of action is drug related, the
regulatory framework for drugs usually applies.
Drug-enhanced devices, such as drug-eluting
stents, coated catheters, anti-infective sutures,
bone cements with antimicrobial agents, and other
devices with antimicrobial coatings enhance the
functionality, efficacy, or performance of devices. In
many cases, these products combine existing devices
with existing drugs. Although the complexity
of the device component can vary depending
on its function, the drug-device interface is often
novel and is critical to the performance of the
combination product. Consequently, development
is much more complicated than that for similar
device-only products. Because the primary
therapeutic action stems from devices, device
regulations primarily govern these products with
a secondary review from drug-related regulatory
agencies, however both the drug and device
regulatory offices review regulatory submissions.
Regenerative medicinal products combine
devices with biologically active substances to
facilitate healing and regenerate damaged tissues.
The device often serves as the scaffolding for the
growth of the biologic component and the product
is often an implant. Examples include Dermagraft
(human fibroblast-derived dermal substitute), coated
absorbable meshes for bone growth, spinal fusion
cages with recombinant human bone morphogenic
proteins, and the artificial replacement organs
(e.g., bioartificial pancreas). These are the most
complex combination products because they have
to take into consideration the interaction between
the product and the body's response to it. The
development process for such products is also
the most complicated and integrated because the
components under development must be tightly
coupled. The primary mode of action varies on a
case-by-case basis.
The combination products market was estimated at
$13.7 billion in 2009, and is expected to grow at a
compound annual rate of 14.5% through 2014 to

reach approximately $27 billion worldwide.84 The
U.S. share of the global market is about 57%. The
majority of these revenues are expected to come
from drug-eluting stents, steroid-eluting electrodes,
antimicrobial coatings and catheters, photodynamic
therapy, closed-loop glucose insulin monitoring
pumps, inhalation devices, transdermal delivery
systems, engineered skin grafts and replacements,
and bone replacement products.
During its first full year of operation in 2004, the
FDAs Office of Combination Products (OCP)
reported that 251 combination product applications
were filed. Since then, the FDA OCP has been
receiving an increasing number of combination
product applications for review each year as
technological advances continue to merge product
types and blur the historical lines of separation
between the FDAs various medical review
centers. In 2008, the FDA received 330 original
applications for combination products which was
an increase from the 329 original applications for
combination products it received in 2007 and the
235 applications it received in 2006.
11.3. MAJOR PLAYERS
DRUG-DEVICE CONVERSION
Combinations involving a device and a drug include
a diverse number of products. One of the most
recognized examples of such convergence is the
drug-eluting stent. Johnson & Johnsons Cordis
division launched the first such stent (Cypher) in
2003 and its worldwide sales totaled $2.7 billion in
2009. Boston Scientific introduced its drug-eluting
stent product (Taxus) in early 2004 and (Promus)
in 2008 which combined attained worldwide sales
of $1.7 billion at the end of 2009. Also in 2008,
Abbott Laboratories introduced its Xience drugeluting stent and Medtronic introduced its Endeavor
drug-eluting stent.
Smaller companies have entered the market as well,
prompted by the success of the early coronary stent
introductions into the market. Cook Medical with its
peripheral drug eluting stent (Zilver PTX) launched
in 2006 targets the prevention of restenosis in arteries
that supply blood to vital organs.
Other examples of drug-device convergence are
Medtronics spinal cage fusion solution (Infuse)
which involves implanting a metal cage that is prepackaged with a bone growth-promoting protein
(rh-BMP-2) discovered by Wyeth. This product is
designed to replace bone grafting with a natural
bone regeneration process. Medtronics revenues
for its biologic-based spinal products reached $881
million in 2009. DePuy, a Johnson & Johnson
company, has also entered the spine segment of the
market. Medtronic has developed an implantable
pump for baclofen, a drug that relieves muscle
spasms in patients with multiple sclerosis, cerebral
palsy, and brain or spinal cord injuries. Guilford
74
Figure 52 gives an overview of the number and type of combination product applications submitted in 2008.
Figure 52 Number of Original Drug/Device Combination Applications Submitted in 2008,
by Application Type and Type of Combination Product

Convenience kit or
Co-package
Prefilled drug
delivery system
Prefilled biologic delivery system
Device coated, impregnated or otherwise

combined with drug
Device coated, impregnated or otherwise

combined with biologic
Drug/ Biologic Combination
Separate products requiring mutually

conforming labeling
Comb. based on mutually conform.

labeling
Other combination products
Total
Application type
Original new drug
10
14
Original
Biologics
license
Premarket approval
510(k)
11
83
11
14
120
Investigational new drug

(IND)
49
18
15
38
15
158
Investigational Device
Exemption (IDE)
13
32
Humanitarian
device
exemption
Total
13
59
23
106
20
15
16
48
30
330
Source: FDA, Office of Combination Products
Pharmaceuticals has developed an implantable drug

delivery device (Gliadel) marketed by MGI Pharma
which provides controlled and time-released of a
chemotherapy agent in the treatment of malignant
brain tumors. The company ALZA, a Johnson &
Johnson company, launched a programmable patch
(E-Trans) which can transport drugs through the
skin using low-level electric energy as an alternative
to the implantable delivery systems.
Through better target identification and gene

expression profiling more directed treatment has
become feasible. A prominent example of this type
of convergence is the use of Genentechs Herceptin,
a genetically engineered monoclonal antibody
for breast cancer patients for whom a diagnostic
test such as Abbotts PathVysion has detected the
presence of a specific protein, human epidermal
growth factors receptor-2 (HER-2).
Diagnostic-Drug Conversion
There is strong incentive for drug and test

developers to co-develop products in order to
prevent introduction of drugs if a predictive test
is discovered after the drug has been launched.
Diagnostic test developers are more likely to create
tests for drugs that are already in the market only
if they are able to share the revenues created
by combining the products. Astra Zenecas
lung cancer drug Iressa was initially launched
for use without a diagnostic test with negative
business consequences in the face of questionable
effectiveness results. In the meantime, Genzyme
developed a diagnostic test. Now that payers
increasingly require that the economic as well as the
therapeutic value of medicines be demonstrated,
the Genzyme test can help determine if a patient
The integration of drugs with diagnostic

instrumentation has contributed significantly to
the improvement in both diagnosis and treatment
outcomes. Positron emission tomography (PET)
scanning is an example of such devices used in
combination with pharmaceutical contrast agents
and radio-pharmaceutical tracers. U.S. sales of
PET scanners totaled $249 million in 2009 and
comprised about two-thirds of the U.S. nuclear
imaging market. Over 1,000 PET and PET/CT
systems are installed worldwide. An entry-level
PET/CT can cost about $1.2 million and the cost
can rise significantly up to $3 million and higher for
a top-of-the-line 64-slice CT hybrid.
75
is a good candidate to receive Iressa. Other

examples include Roche Holding AG obtaining
a global license from Genzyme to develop a test
for lung cancer cell mutations in order to improve
administration of its drug Tarceva; and Roches
collaboration with OSI Pharmaceuticals (with
which it makes Tarceva) to develop a companion
test to identify people with non-small lung cell
cancer.
Diagnostic-device-drug convergence
Integration of diagnostic and device capabilities
can help improve early-to-late-stage diagnosis
and progressive disease monitoring. Delivery of
appropriate drug doses based on routine monitoring
significantly increases efficiency, convenience and
the therapeutic effectiveness for chronic disease
instances.
Blood glucose monitors combined with implantable
insulin pumps have come into wide-spread use
and serve as good example of such convergence.
Medtronic was the first company to initiate its
Paradigm Link glucose monitor in 2004. Since
then, Medtronic has experienced significant growth
in this segment. The Companys diabetes-related
sales amounted to $1.01 billion in 2008 and reached
$1.24 billion in 2010.
Drug Delivery Technology Magazine (www.
drugdeliverytech-online.com) has identified
approximately 100 U.S. companies offering
drug delivery technologies currently or in the
development stage. Following are some additional
suppliers of such delivery systems.
Other major suppliers
Alza Corporation (a subsidiary of J&J)
(www.jnj.com)
Technology platform: OROS, D-Trans, Duros
Applications: oral, transdermal, implant
Development stage: in market
Partners: Pharmacis Corp., Novartis, Muro
Pharmaceutical
Antares Pharma Inc.
(www.antarespharma.com)
Technology platform: Needle-free injectors,
mini-needle injectors
Applications: insulin, growth hormone
Development stage: Clinical trials
Partners: JCR, SciGen
Aveva Drug Delivery Systems Inc.
(www.avevadds.com)
Technology Platform: Gel matrix adhesive
transdermal patch, Membrane controlled
systems, Liquid semi-solid formulations,
Dissolvable aqueous films
Applications: Once-a-day isosorbite dinitrate
Chrono-controlled release Analgesics,
Hypoglycemics
Development stage: mostly in clinical trials

Partners: Pfizer, Watson, Perrigo, BioDelivery
Sciences International
Baxter Healthcare Corporation
(www.baxterbiopharmasolutions.com)
Technology Platform: Enhanced packaging
(ready-to-use systems, ready-to-mix systems.
Promaxx Microsphere Technology, Nanoedge
Dispersion Technology
Applications: premixed parenteral formulations,
injectable and inhalable drug delivery Development
stage: in market
Partners: not disclosed
BioDelivery Sciences International Inc.
(www.bdsinternational.com)
Technology Platform: BD Mypack SCF glass
prefillable, BD Pens self injectable, BD Accuspray,
BD Preventis automatic needle shielding
Applications: parenteral, nasal
Partners: various
Cirrus Pharmaceuticals Inc.
(www.cirruspharm.com)
Technology Platform: Powder inhaler formulations,
Nasal spray dformulations, Parenteral and oral
formulations, Peptide and protein formulations
Applications: Inhalation, parenteral, oral
Partners: not disclosed
Corium
(www.coriumgroup.com)
Technology Platform: Corplex Hydrogel,
MicroCore micro-delivery system,
Delivery modifiers
Applications: transdermal, mucosal,
wound care, diagnostic
Partners: pharma, specialty, device andd
wound care companies
Dow Corning Corporation
(www.dowcorning.com)
Technology Platform: Transdermal drug delivery,
controlled release devices, topical excipients
Applications: pressure-sensitive and soft-skin
adhesives, ointments, emulsions, sprays,
volatile excipients
Partners: many
Emisphere Technologies
(www.emisphere.com)
Technology Platform: Eligen
oral drug delivery systems
Applications: oral delivery of micromolecules
and other non-orally available therapeutics
Development stage: various, Phase I to
Phase III Partners: Novartis, Genta
76
11.4. CONVERGENCE STRATEGIES

One major difference between drugs and devices is
that drugs take much longer to reach the market.
A 10-year time frame from early development to
market introduction is common for many drugs.
Drug companies are accustomed to such long-term
planning while device companies are not. Even
if the collaboration begins during a drugs phase
2 trials, it may be years before the drug product
is approved. Devices can go through several
generations in the time a single drug moves from
R&D to approval.
Another aspect to consider is that the probability of
success for drugs is much lower than that of devices.
Drug companies also encounter a much more costly
development process.
Another difference is that once approved, drugs
can remain unchanged on the market for decades.
On the other hand, rapidly advancing technology
and continuing product modifications characterize
the device industry. Static devices are prone to
obsolescence, but older drugs can retain satisfactory
profit margins.
Because of the above considerations, companies in
both sectors face different financial incentives. Until
recently, drug companies focused on blockbusters,
i.e., drugs with sales exceeding $1 billion annually.
Many drugs have hit that target, while few device
companies have reached such volume. As such,
companies have pursued different approaches to
achieving drug-device convergence.
Research and Development Stage (R&D)
Solutions which rely on novel technology platforms
and involve products with unique capabilities and
a high level of profitability are usually undertaken
in the early R&D stage. Producers of drug-eluting
stents which incorporate new materials and design
features have used this approach. The convergence
process at this stage tends to be complex, requires
significant resources and a longer time horizon. It
is mostly the large companies such as Johnson &
Johnson, Boston Scientific, and Medtronic which
have taken this avenue.
Production Stage
First-generation drug-eluting stents were developed
by licensing the drugs from pharmaceutical
companies for use as coating on existing bare metal
stents. Convergence of drugs and devices was done
at the manufacturing level. Spinal cage fusion,
regenerating dental implants and transdermal
patches are also examples of production level
convergence. The process of integration is less
complex than during the R&D stage and the time
frame for market introduction is shorter as well.
Marketing Stage
Convergence at this level involves mainly joint
packaging, labeling, advertising, sales, and distribution
of related products. Some products may be packaged
together such as glucose monitors with removable and
refillable insulin pumps. Others may be labeled for
joint use but packaged separately such as diagnostic
kits and related drugs. The time horizon at this stage
is much shorter and existing structures and processes
can be utilized. The market value of the converged
product may be only incrementally larger than that of
the separate products.
11.5. REGULATIONS
The FDAs Office of Combination Products has
primary jurisdiction over the implementation
of the rules established in 2004. In reviewing
product submissions this Office is guided by the
principle of Primary Mode of Action (PMOA)
which is defined as the single mode of action
of a combination product that provides the most
important therapeutic action of the combined
product. Depending on the classification of the
submitted product, the further processing of the
application may be assigned to one of the following
agencies:
The marketing costs associated with entering
the U.S. medical device sector can be substantial
as is the time necessary, but once overcome, the
opportunities can be great. This chapter will discuss
some of the most relevant marketing dynamics
of the medical device industry. We will look at
the purchasing process and marketing tools that
are standard (in some cases required) to help the
decision maker decide about a new product. The
chapter will also address the question of how to
access the individuals who make the purchasing
decision.
Center for Biologics Evaluation and Research
(CBER)
Center for Drug Evaluation and Research (CDER)
Center for Devices and Radiological Health
(CDRH)
In case there is a dispute over the jurisdiction of the
combination product, the applicant can file a formal
Request for Designation (RFD) to the OCP.
Combination products are typically subject to one
of two different but parallel initial FDA evaluations:
CDRHs investigational device exemption (IDE)
and CDERs investigational new drug (IND)
processes. However, they rarely require both.
Depending on center jurisdiction, a sponsor must
formally follow the IDE process for combination
products regulated as medical devices or the IND
process for products regulated as drugs. Regardless
of jurisdiction, the sponsor typically needs to
provide FDA with data to support both processes.
For example, drug-eluting stents are regulated by
CDRH as medical devices and therefore follow
77
the pre-IDE process. However, the series of FDA

submissions leading to product approval all involve
some data specifically intended to be reviewed by
CDRH (e.g., stent mechanical performed testing)
and other data relevant to CDER review (e.g.,
CMC).
Labeling
The FDA is devoting considerable time and effort
in cooperation with the industry to arrive at suitable
labeling that reflects the safety and effectiveness of
the product. An important precedent for product
labeling was established with FDAs approval of the
Cypher and Taxus stents. The instructions-for-use
labeling for both products reflects a compromise

with regard to the style and content of standard
drug- and device-labeling requirements.
Two areas of labeling are considered critical by the
FDA: (1) cross-labeling of branded products that
are intended to be used in combination; and (2)
labeling of integral combination products. There
are still open questions as to how related issues
should be handled and more settled rules are likely
to emerge from individual practical cases. The
longer-term goal will be to achieve international
harmonization of all labeling considerations as well
as standardization of the regulatory process.
12. Marketing Tools and

Distribution Channels
David Kouidri, President Polydec International and
12.1. DEFINING DISTRIBUTION
CHANNELS
Understanding the specifics of distribution channels
that affect a company's industry can be a vital step
in successfully accessing potential customers. It
is also important to evaluate how the competition
constructs distribution channels and to assess
industry norms, comparative advantages, and areas
of opportunity.
The process of defining the distribution channels
of an industry consists of several steps. First the
purchasing process must be outlined and the key
decision makers must be identified. It is then
critical to understand the communication methods
most commonly used by companies to connect with
potential customers. In the medical field, scientific
publications, presentations at conferences as well
as traditional advertising play an important role in
communicating to potential and current customers.
Finally, it is important to assess the level of service
and interaction expected by customers and the
dynamics of customer relationships in the industry.
This is particularly relevant in many of the highly
competitive segments in the medical field that
have a direct implication on the local presence a
company needs to consider.
The dynamics of the distribution channel are
unique to the market segment and the product
being supplied.
12.2. MARKET SEGMENTATION
The medical device industry in the United States
is very large and best analyzed as specific market
segments into sub industries. This report discusses

some of the key market segments and demonstrates
how each segment has its own characteristics,
entry platforms, dynamics and other factors
that affect how one approaches the market. It is
also important to understand who the potential
customers are and where they shop for, or source
new products and technologies (see Marketing
Platforms section 12.9). For example, if the end
user and purchaser of the medical product is a
doctor/surgeon, they may look for technology at
their medical association conference which has a
trade show (e.g. American Academy of Orthopedic
Surgeons (www.aaos.org) as well as use their
publications (AAOS Now) to learn about new
products.
However, if the target audience is orthopedic
OEMs, then it may be best to use the Orthopedic
Manufacturing Technology Conference and Trade
Show (OMTEC www.orthoworld.com) and the
accompanying publication, Bonezone, which targets
the OEMs.
Clearly understanding the potential customer and
where they go shopping is of utmost importance
when targeting the market. Other examples
are Heart Rhythm, the Trade Show targeting
the cardiovascular industry, American Dental
Association Trade Show for dental equipment,
among others. The example below shows the
segmentation within the orthopedic sub sector
and their marketing platforms that target potential
customers, be it surgeons or OEMs.
78
Orthopedic Sub sector venues
Targeting Surgeons
Targeting OEMs
Trade Shows
American Academy of Orthopedic

Surgeons Annual Conference & Trade
Show
Orthopedic Manufacturing
Technology Expo and Conference
(OMTEC)
Publications
AAOS Now
JAAOS
BONEZONE
In addition, suppliers can be targeting multiple

markets such as hospitals, outpatient centers,
physicians offices, other healthcare providers, and
medical OEMs. Therefore, the medical device
sector can also be segmented into two categories,
namely medical technology products, and
conventional hospital supply products.
Medical Technology Products
Medical technology products are devices
that address an unmet need and/or create
new standards and procedures in the medical
field, including surgery. Examples include the
implantable cardioverter defibrillator (ICD), new
orthopedic implants, and drug coated stents. As
these novel products required new standards, they
also commanded higher prices and increased
margins. Historically, the decision to use medical
technology products was made by medical
doctors. Increasingly purchasing agents are the
decision makers, typically basing their decisions on
standardized specifications, clinical performance,
and price.
Introducing new medical products into the U.S.
market can be time consuming and expensive due
to the need for clinical trials, evaluations and a
proactive, consultative sales process. This poses a
challenge to the small and medium sized firms that
may not have the financial and human resources
to manage the process from beginning to end.
Therefore, strategies that include partnerships and
technology licensing should be included among
the options considered when entering into the U.S.
market. (See Chapter 13 Daniel Wuersch).
Conventional Hospital Supply Products
Conventional hospital supply products are
considered commodities with bulk purchases
usually made by a hospital procurement officer.
This category of conventional products includes
bandages, syringes, and similar items. This is
typically a high volume type transaction where low
margins are the norm and long term contracts are
the key to profitable business. However, recently
there has been some discussion in the industry
about whether or not such long-term contracts
hinder competition and create unfair monopolies.
It is argued that long-term contracts discourage
other firms from investing in new product areas
within that sector simply because they do not
have the monetary incentive and revenue. In the
U.S. today, conventional hospital products can
provide a good revenue stream that helps fund the
development of new higher technology products.

The Importance of Medical
OEMs and their Supply Chain
Medical OEMs play a very large role in the medical
industry, not only as a vital distribution channel but
also as market leaders with the financial capability
to change standards and, in turn, guide the market.
As technologies change rapidly, gaining access to an
OEM supply chain can be critical to success in the
market. Many OEMs have information on their
websites, but it can be limited as new projects are
kept from competitors and names of engineers and
buyers are hard to find. Therefore, using platforms
such as trade shows, conferences, publications,
and other sources can offer insight as well as direct
contact to those OEMs. These platforms can also
offer insight about where the industry is going
and where the OEMs may be looking for new
developments and technologies.
12.3. THE DECISION MAKERS
Healthcare providers cover a very broad range
of persons and entities providing services in
the healthcare sector including general practice
physicians, nurses, physical therapists, physicians
assistants, surgeons, a multitude of specialty fields,
hospitals, hospices, nursing homes, clinics, etc.
These persons and organizations are the direct
links to the ultimate end-users of medical devices,
the patient. In some cases the patient might have
some input regarding medical devices that will be
implanted, but for the most part, it is the doctors
and healthcare providers that make the decisions
about which devices they will recommend or use
on patients. Patients generally follow the advice
or recommendations given by their physician or
healthcare provider. In most cases, when it comes
to marketing medical products and devices, the
healthcare providers should be considered the enduser. This being the case, marketing efforts should
be designed to primarily target healthcare providers.
Since doctors continue to play a vital role in the
purchasing of medical technology products. There
are, however, times when the influence of doctors
is secondary to the health insurance companies (see
Reimbursement). It has become common practice
that health insurance companies get the last say
regarding certain devices and procedures since the
insurance companies ultimately decide whether or
not they will reimburse for the device. Nonetheless,
it is clear that doctors remain on the front line
when it comes to recommending procedures and
products to patients. While doctors continue to
79
be instrumental in evaluating and recommending

new techniques, patients are increasingly seeking
information on medical conditions and can sway
their healthcare providers choice of technologies.
Therefore, direct-to-consumer advertising should
not be overlooked.
Procurement officers at hospitals are important
decision makers especially when discussing the
purchase of conventional hospital products.
Procurement officers also purchase some medical
technology products. Purchases by these officers
can be done either directly, or more commonly, via
a Group Purchasing Organization (GPO).
Key factors for medical device purchase
consideration
Price of the medical device (i.e., direct cost
comparison to similar devices)
Benefits to the patient relative to other
commercially available devices or procedures (i.e.,
size/weight, reduced risk of infection, reduced
complications, improved patient quality of life,
improved safety, increased survival rate)
Efficiency of use (i.e., reduced surgical time, fewer
surgical staff)
What is the service life of the device? (i.e., does
the device last longer than other products)
Ease of installation or procedure (i.e., is the new
device easier to use or install compared with other
available devices)
12.4. PURCHASING PROCESS
There are two primary channels through which
doctors, hospitals and other healthcare providers
purchase medical products: (1) Direct Purchasing,
and (2) through Group Purchasing Organizations.
Direct Purchasing
Some large hospitals and healthcare providers do
their own purchasing directly. The purchasing
process varies by hospital or healthcare facility
and by state as each organization has its own
procurement guidelines and is governed by state
statute as well as the institutions own policies.
Some large institutions are likely to have a
procurement department which is responsible for
the procurement of supplies, materials, equipment
and services for the hospital. A trend in the
industry is for hospitals to have their common stock
inventories online with suppliers in an effort to
maintain just-in-time inventory levels. Distributors
are primarily used to maintain and distribute
common stock and frequently used goods. Hospital
departments in need of such items are often
required to purchase them through their responsible
department. Vendors may be discouraged or even
forbidden to attempt to "back door" sell "stock"

items to individual departments.
Group Purchasing Organizations
Nearly all U.S. hospitals buy through Group
Purchasing Organizations (GPOs) which are
cooperatives that increase the buying power of
their healthcare provider members. In addition,
GPOs include other healthcare providers such
as ambulatory care facilities, nursing homes, and
home health agencies. GPOs buy a wide array
of products ranging from surgical supplies and
medical equipment to pharmaceuticals and data
processing. Smaller healthcare providers usually
elect to do their purchasing through GPOs
because these smaller organizations do not have
the buying power of some of the larger healthcare
systems. GPOs are able to negotiate significant
price discounts with suppliers and distributors, and
provide collective buying power for their healthcare
provider members. It is estimated that GPOs
save their members an average of 10 percent on
supply costs. This includes price savings on goods
purchased through GPOs, patronage dividends
received from GPOs, and labor costs avoided by
using GPOs. Smaller hospitals purchase about 20
percent more supplies through a GPO than larger
hospitals because of the cost savings. On the other
hand, larger hospitals in some cases are able to
negotiate directly with suppliers for better pricing by
using the GPO price as a reference. Over half of
U.S. hospitals and hospital systems use GPO pricing
as the benchmark for starting their own negotiations
for physician preference items, which are the most
expensive items that they purchase.85 It is expected
that the use of GPOs will continue to be strong
in the future. Overall, it is estimated that hospitals
and nursing homes purchase about 80% of their
supplies through GPO and integrated delivery
network contracts.86 Listed below are the names and
websites of the leading GPOs.
Amerinet, headquartered in St. Louis, MO,
was founded in 1986, and is one of the country's
largest group purchasing organizations with
members throughout the U.S. The company
operates through two shareholders: Administrative
Resources, Inc. and Intermountain Healthcare.
Amerinet has more than 39,000 member facilities
including hospitals, surgery centers, managed
care organizations, clinics and integrated delivery
networks. The GPO has a purchasing volume of
about $7 billion. www.amerinet-gpo.com
The Broadlane Group is a privately held
company based in San Francisco, CA. The
company operates Broadlink, a private exchange
of more than 1,100 acute care facilities, more
than 5,000 ambulatory care and surgery centers,
and more than 36,000 physician practices which
purchase about $10.0 billion in supplies annually.
www.broadlane.com
80
Child Health Corporation of America

is based in Shawnee Mission, KS. Its 41 owner
hospitals are North America's leading children's
hospitals. The GPO represents more than 20,000
physicians, 100,000 employees, $14 billion in
revenue and $1.8 billion in overall medical, surgical
and pharmaceutical products. www.chca.com
Consorta, Inc. based in Schaumburg, IL, is a
leading healthcare resource management and group
purchasing organization, whose shareholders are
faith based or non profit health systems. Consorta is
a cooperative owned by 11 shareholders consisting
of more than 450 acute care facilities, more than
200 extended care facilities, and more than 2,500
other sites of care. Consortas annual purchasing
volume is about $4.3 billion. www.consorta.com
GNYHA Services, Inc. (Greater New York
Hospital Association) was founded in 1904 and is a
one-of-a-kind trade association comprising nearly
250 hospitals and continuing care facilities, both
voluntary and public, in the metropolitan New
York area and throughout the State, as well as New
Jersey, Connecticut, and Rhode Island. GNYHA
is a member of the Premier Group Purchasing
Alliance. www.gnyha.org
HealthTrust Purchasing Group (HPG)
was established in May, 1999, and is based in
Nashville, TN. The companys main focus is
to provide superior and cost efficient services to
both its patients and its members. HPG supplies
nearly 1,400 not-for-profit and for-profit acute care
hospitals as well as over 3,000 ambulatory surgery
centers, alternate care sites and physician practices.
HPG maintains a purchasing volume of about $17
billion. www.healthtrustpg.com
HPS was founded in 1949 and is a not-for-profit,
member-owned, member-operated super-regional
group purchasing organization based in Middleville,
MI. HPS leverages the buying power of over 2,600
organizations to provide savings to its membership
through supplier contracts, manufacturer
agreements and equipment partnerships. HPS has
partnered with MedAssets to allow its members
to take advantage of its proven regional program
coupled with MedAssets comprehensive national
portfolio. www.hpsnet.com
Innovatix, LLC, headquartered in New York
City, is the nation's largest non-acute care group
purchasing organization (GPO). Innovatix provides
group purchasing and consultative services to
its national membership base of non-acute care
pharmacy and institutional providers. Primary
members include the Infusion Providers, Extended
Care, Long Term Care (Dispensing) Pharmacy,
Retail and Mail Order Pharmacy, Institutional
Providers, and Independent Medical Oncologists
segments. Contracted product areas include
pharmaceutical, medical supply, food service,
equipment, fractionated blood products, laboratory
and office supplies. Innovatix has an annual

purchasing volume of about $2.3 billion.
www.innovatix.com
MedAssets Supply Chain Systems,
headquartered in Atlanta, GA, is the largest
independent group purchasing organization in the
country. The GPO serves more than 125 health
systems, more than 3,300 acute care hospitals and
more than 40,000 non-acute healthcare providers.
MedAssets had about $24 billion in purchasing
volume in 2009. www.medassets.com
Medbuy Corporation is Canada's only
truly full-service healthcare group purchasing
organization. Medbuy has established relationships
with more than 150 of Canada's leading healthcare
manufacturers and service providers, and has nearly
$2 billion in purchasing power. www.medbuy.ca
MMCAP (The Minnesota Multistate Contracting
Alliance for Pharmacy) is a voluntary group
purchasing organization operated by the State of
Minnesota serving government-based healthcare
facilities. MMCAP is currently comprised of 46
states and the Cities of Chicago and Los Angeles,
with thousands of participating facilities. The goal
of MMCAP is to provide member organizations
the combined purchasing power to receive the
best prices available for pharmaceuticals, medical
supplies, and related products. MMCAP member
facilities purchase over $1 billion per year and have
national account status with all of the major brand
name and generic pharmaceutical manufacturers.
www.mmd.admin.state.mn.us/mmcap
Novation LLC in Irving, TX, was established
Jan. 1, 1998, when VHA Inc. and the University
HealthSystem Consortium, two national healthcare
alliances, consolidated their supply-contracting
functions. Novation acts as the supply company for
members, associates and affiliates of both alliances,
to help them manage and reduce supply costs. The
GPO serves healthcare organizations of all sizes,
ranging from many of the nation's best-known
and most prestigious healthcare systems to small,
rural hospitals throughout the country. Novation
represents the purchasing interests of nearly
25,000 VHA and UHC member organizations
and 5,500 Provista members covering 28,000 sites,
and manages agreements with about 600 suppliers
and distributors. Novation maintains an annual
purchasing volume of more than $37 billion.
www.novationco.com
Premier is a leading healthcare alliance that
is collectively owned by about 200 independent
hospitals and healthcare systems in the U.S.
Premiers owners include some of the nations
largest and best-known not-for-profit hospital and
healthcare systems and referral centers as well as
strong community hospitals, generally mirroring the
composition of the hospital/health system industry
in the U.S. Together, they operate or are affiliated
81
with more than 2,300 hospitals and more than

66,000 other healthcare sites, and have a purchasing
volume of about $33 billion.
www.premierinc.com
GNYHA Services Inc.

www.gnyhaservices.com/29/Default.aspx
(Premier is GNYHAs sole group purchasing
organization)
PRIME is a group purchasing organization that

provides cost savings for its member organizations
which include hospitals, nursing homes, ambulatory
surgery centers, integrated delivery networks,
assisted living centers, social agencies, and similar
organizations. PRIME services and supports its
members within the Mid-Atlantic region including
Delaware, Maryland, and Washington D.C.
PRIMEs national affiliate, MedAssets, provides
complete coverage across the U.S.
www.pr1me.org
Health Trust Purchasing Group:

www.healthtrustcorp.com/national-prospectivevendor.php
Provista is a leading supply chain improvement

company providing group purchasing and
business solutions for more than 15,000 healthcare
systems, hospitals, medical facilities, universities
and colleges, and corporations nationwide.
Provista is jointly owned by VHA Inc. and the
University Healthsystem Consortium (UHC), and
its agreements are contracted and managed by
Novation, the contracting services company of
Provista, VHA and UHC. www.provistaco.com
Yankee Alliance (YA) provides group purchasing
and supply chain management services to its 66
member acute care hospitals located across 48
states. The organization does most of its national
contract purchasing through its membership in
Premier (see above). In addition, YA complements
its Premier portfolio with regional contracts
specifically developed by and for its members.
www.yankeealliance.com
Selling to Group Purchasing Organizations
The steps required to sell medical technology
products and services to GPOs vary by
organization. As such, companies seeking to
approach GPOs about introducing their company,
products, and/or services should contact the
respective GPOs directly. Following is a list
of GPOs and the corresponding link which
will provide the organizations instructions/
requirements for becoming an approved vendor.
Amerinet:
www.amerinet-gpo1.com/Amerinet.aspx?tabid=150
The Broadlane Group:
www.broadlane.com/tbgsuppliers/supplier_
registration.html
Innovatix:
www.innovatix.com/NewVendorInfo.aspx
MedAssets:
www.medassets.com/vendor/Pages/
VendorResources.aspx
Medbuy Corporation:
www.medbuy.ca/en/suppliers/becomesupplier.asp
MMCAP:
www.mmd.admin.state.mn.us/mmcap/current.htm
Novation:
http://www.novationco.com/suppliers/become_a_
supplier.asp
Permier:
http://www.premierinc.com/about/suppliers/
index.jsp
PRIME: Send a letter of introduction to PRIME,
6820 Deerpath Road, Elkridge, MD 21075-6234.
Please include information about your company
and the products/services you are offering.
http://www.pr1me.org/frm_vendor_part.html
Provista: GPO services are handled through
Novation (See above)
http://www.novationco.com/suppliers/become_a_
supplier.asp
Yankee Alliance:
http://www.yankeealliance.com/content/
contracting-process
There is also the possibility to reach these GPOs
through their industry association HIGPA (Health
Industry Group Purchasing Association) www.
higpa.org. Vendors can advertise to GPO member
organizations via the HIGPA International Expo
event, the HIGPA National Pharmacy Forum event,
the HIGPA Daily eNews, or the www.HIGPA.org
Website banner advertising.
http://www.higpa.org/advertise/default.aspx
Consorta: has outsourced its GPO activities to

Health Trust Purchasing Group. See below.
Child Health Corporation of America:
www.chca.com/contracting/index.html
(Premier is CHCAs sole group purchasing
organization)
82
12.5. ROAD MAP FOR MARKET ENTRY

A road map to market is a useful tool that helps plot out the steps necessary to take when approaching the
new market. It will also help to understand what needs to be done and the sequence. In this case, we focus
on the segment involving the engagement of doctors or other decision makers in the buying process. It is here
that the distribution channels and marketing take front stage. Engaging the medical doctor/purchaser can be
broken down into 4 steps: (1) standards/product comparison; (2) opinion leader evaluations; (3) promotion of
evaluation result; and finally, (4) sales and distribution.
Figure 53 Road Map for Market Entry into the U.S. Medical Device Industry
Legal & Regulatory

Consideration
Engagement of
Medical Doctors/
Purchasers
Production
Standards
Opinion Leader
Evaluations
Clinical Trials
The road map should begin with a comparison of

products, especially those in the market today that
set the standard.
From a marketing perspective, introduction of a
product that sets a new standard which will have an
impact on the industry may face substantial barriers
to entry, including legal disputes. Other competitive
tactics may also be used to prevent entry such as
aggressive marketing messages from competitors.
However, if a new product creates new and
successful standards, it can almost become a
necessity that the field adapts, and begins using the
new standards. This is partly due to the risk doctors
face if they do not adapt to new technologies
and procedures for the benefit of the patient
(malpractice law suits). Nevertheless, the setting
of new standards and comparative advantages
can have an extremely important implication on
marketing and market entry strategy.
In the U.S., clinical trials are the most common
tool used to prove that new medical devices,
technologies, and procedures are useful, and
most importantly, safe. Clinical trials are
usually performed by a third party evaluator or
opinion leader, and commonly cited in relevant
literature promoting the usefulness and safety of
the development. It is therefore, important to
understand the relevance of the opinion leader
within the U.S. medical device industry and the
process involved.
12.6. IMPORTANCE OF OPINION
LEADERS
Opinion leaders are the leading voices within
each medical device market segment and play an
important role as evaluators of new technologies.
Opinion leaders can be doctors, medical professors,
scientists, and others who are recognized within the
industry as legitimate and respected investigators.
The higher the recognition of the opinion leader
within the field is, the more valuable the opinion.
Use of Medical
Devices on
Patents
Evaluation
Results
Citations
Sales &
Distribution
A favorable opinion from one of these leaders can

be helpful, and most commonly crucial, to convince
a user (be it a doctor, scientist, a medical device
producer) to change suppliers and go with a new
standard. A positive opinion from a respected
individual can be a major marketing tool.
Access to opinion leaders can be very challenging
due to numerous elements including time
constraints, costs associated with an evaluation, and
established ties between doctors and medical device
manufacturers.
12.7. CLINICAL TRIALS
The most common evaluation of a device or
technology in the medical field is known as a clinical
trial. With many medical products, going through
a clinical trial is required for regulatory approval.
The extent and expense of a clinical trial varies by
product as does the legal regulations of such trials.
However, for the purpose of marketing, a clinical
trial can be a critical testimonial or reference.
Clinical trials are done by three types of groups: (1)
academic institutions; (2) a private medical research
facility; or (3) a combination of both. The cost of
the trial can be covered by numerous organizations,
including a federal agency, a hospital, and/or the
medical device manufacturer. The evaluation is
agreed to by a lead professor/doctor (Principle
Investigator PI) and is usually implemented by
a team of researchers and doctors, often at several
independent facilities. Oversight of such trials is done
by committee made up of leaders within the field.
If successful, clinical trials provide essential
marketing support by establishing the products
clinical benefits, providing key opinion leader
validation and by guiding the development of
marketing materials. Clinical information must
be rigorously documented, properly presented and
published to be useful.
83
Although many suppliers may not need clinical

trials, understanding whether or not a specific
market segment relies heavily on clinical data for
marketing support is important. Proof of concept/
product is a necessary sales tool within the medical
device industry.
U.S. Agent for Sponsorship of Clinical Trials
If a Swiss medical device manufacturer wishes to
conduct a clinical trial in the U.S. to obtain FDA
approval to market the device, they must find a
U.S. partner to act as their agent to request an
Investigational Device Exemption (IDE) to conduct
the clinical trial. A foreign company cannot sponsor
an IDE; therefore, they must have a U.S. agent who
acts as the sponsor. The regulations regarding the
promotion of IDE's are as follows:
Sponsors, investigators, or any person acting for or
on behalf of a sponsor or investigator cannot: (1)
Promote or test market an investigational device,
until after the FDA has approved the device for
commercial distribution; (2) Commercialize an
investigational device by charging the subjects or
investigators a higher price than that necessary
to recover costs of manufacturing, research,
development, and handling; (3) Unduly prolong
an investigation; (i.e. If data developed by the
investigation indicate that pre-market approval
(PMA) cannot be justified, the sponsor must
promptly terminate the investigation.); or (4)
Represent that an investigational device is safe or
effective. However, the sponsor may advertise for
research subjects to solicit their participation in a
study. Appropriate advertising methods include but
are not necessarily limited to: newspaper, radio, TV,
bulletin boards, posters, and flyers that are intended
for prospective subjects. No claims should be made,
either explicitly or implicitly, that the device is safe
or effective for the purposes under investigation,
or that the test article is known to be equivalent or
superior to any other device.
Solicitation of Candidates
for Clinical Trial Use
In order for medical device manufacturers to find
suitable candidates to use in clinical trials, it is
necessary that they be allowed to advertise to attract
persons for the study group. Since the medical
devices are not yet approved for commercial
distribution, they are classified as Restricted Medical
Devices. A draft guidance proposal for consumerdirected advertising was issued on 10 February
2004. The FDA's guidance documents, including
this guidance, do not establish legally enforceable
responsibilities. Instead, guidances describe the
FDA's current thinking on a topic and should be
viewed only as recommendations, unless specific
regulatory or statutory requirements are cited.
Listed below are the non-binding recommendations.
The Federal Food, Drug, and Cosmetic Act
(the Act) requires that manufacturers, packers,
and distributors who advertise restricted devices

distributed or offered for sale in any State include
in all advertisements certain information about the
advertised device's uses and risks. Specifically, the
Act requires such advertisements to contain "a brief
statement of the intended uses of the device and
relevant warnings, precautions, side effects, and
contraindications".
The purpose of this guidance is to describe an
approach that the FDA believes can fulfill the
requirement of the brief statement in connection
with consumer-directed broadcast advertisements
for restricted devices. The approach presumes that
such advertisements:
(1) Are not false or misleading in any respect. This
would include communicating that the advertised
device is restricted to sale, distribution, or use only
upon authorization of a licensed practitioner,
or upon other conditions established by FDA in
regulations, or in an approval order.
(2) Present information about effectiveness and
information about risk in a balanced manner.
(3) Include a thorough major statement conveying
all of the device's most important warnings,
precautions, side effects, and contraindications in
consumer-friendly language.
(4) Communicate all information relevant to the
device's indication (including a brief statement of
the intended use(s) of the device and any limitations
to use) in consumer-friendly language.
The full draft can be found at:
www.fda.gov/downloads/MedicalDevices/
DeviceRegulationandGuidance/
GuidanceDocuments/ucm071359.pdf
Clinical Research and
Regulatory Consulting Support
The process of bringing a new medical device or
system to market is complex and during the product
development cycle it is important to anticipate
the many requirements that must be satisfied
to allow successful market introduction. Many
manufacturers consider outsourcing some of the
work to a contract research organization (CRO) or
regulatory consultant.
The decision to outsource and selection of the
most effective consultant can be difficult, as can
management of the consultant relationship.
Working with a CRO or regulatory consultant
can eliminate the need for hiring additional inhouse personnel and reduce the cost and time
to bring a new product to market because of the
experts superior knowledge of the regulatory
requirements. During the early development of
a medical device, IVD device, assay or reagent,
there may not be a clear FDA premarket review
84
pathway that can be identified. A knowledgeable

CRO can advise the manufacturer about this
constantly evolving regulatory environment, and
guide the company through it. Further along in
the product development process, the CRO can
provide guidance on risk assessment, establishment
of design controls, and maintenance of the design
history file. These factors then become the basis
for future regulatory submissions. The CRO can
also assist with designing and conducting a clinical
study if market introduction requires clinical data
to support an FDA submission, citation in scientific
publications, or to convince doctors to use the
product. The CRO can help define the clinical
study strategy, formulate the end points, advise
about the number of patients or patient samples,
identify the site locations, and estimate the duration
of the study. Since FDA requirements for clinical
data may be substantially different from European
requirements, guidance from a CRO can be very
helpful.87 Following is a short list of leading U.S.
CROs that provide services for medical device,
bio/pharmaceutical, and combination product
manufacturers. CROs that primarily focus on
biological and pharmaceutical products are not
included in the list.
Alquest is a clinical research organization and
regulatory consultancy specialized in medical
devices, in vitro diagnostics (IVDs), biologics,
and combination products. The company is the
preferred provider of regulatory, clinical and
compliance services to several of the worlds largest
device manufacturers, as well as leading venturebacked startups. Alquests clinical expertise spans
all manner of technologies, therapies, indications,
and business strategies. www.alquest.com
Medpace provides true device expertise with over
1000 employees and 18 offices worldwide, providing
coverage for clinical trials in over 40 countries.
Whether you are launching your CE mark trial or
a global pivotal trial for PMA approval, Medpace
can help you navigate the regulatory landscape
and leverage our global infrastructure for the
highest quality results. Our dedication to medical
device trials, best-in-class clinical trial management
processes, and customer focused philosophy position
us as a strategic partner to help you complete

your clinical trial on time and on budget. Our
relationships with investigators and clinical sites
with therapy specific device trial experience allow us
to deliver results. www.medpace.com
Omnicare Clinical Research (OCR) is a
global Phase I to IV contract research organization
serving the pharmaceutical, biotechnology and
medical device industries. OCR has experience in
the following areas: Cardiovascular, Dermatology,
Endocrinology and metabolism, Gastroenterology,
OB/GYN, Hematology, Infectious disease &
immunology, Musculoskeletal, CNS, Oncology,
Allergy & respiratory, Dental, Internal Medicine,
Ophthalmology, Pediatrics, Pharmacology, and
Radiology. The company has office locations in 32
countries. www.omnicarecr.com
Regulatory and Clinical Research Institute
(RCRI) began operations in 1999 and has helped
more than 400 companies worldwide translate their
product plans into successful revenue generating
businesses. The Companys clients range from
development stage start-ups to the largest Fortune
500 companies. RCRI works with products ranging
from simple modifications of market released
products to novel products combining drugs,
devices, and biologics. RCRIs work has involved
many medical specialties including: Anesthesiology,
Biologicals, Cardiology, Dental, Gastroenterology,
Infection control, In vitro diagnostics, Microbiology,
Neurology, OB/GYN, Ophthalmology,
Orthopedics, Plastic Surgery, Radiology,
Respiratory, Spinal, Urology, and Wound healing.
www.rcri-inc.com
12.8. PUBLICATIONS
One of the more common vehicles used by
medical device companies to introduce and market
product capabilities to the U.S. market is through
publications, or citations, within relevant peerreviewed medical journals magazines. Medical
publications are an important communication
channel for publishing results of trial and
introducing new technologies. For a listing of the
most relevant medical publications see Annex II on
page 179.
General Science Publications

Nature, Scientific American
Medical Science Publications

Journal of the American Medical Association
Circulation
Significance of
Scientific Breakthrough
Figure 54 Pyramid Structure of Science Publications
Specialty Medical Publications

Circulation (mag. for cardio-vascular med
85
The field of scientific and medical publications can

be depicted in a pyramid-like structure (see Figure
54). At the top are the most prestigious general
science magazines such as Nature (www.nature.
com), or Scientific American (www.sciam.com),
which publish major scientific breakthroughs from
many fields of science including medicine, and
have a large subscription base. Only substantial
breakthroughs in medicine find their way into these
general science publications. However, these are
not the publications of choice that the "decision
makers" read as a source to find new technologies
and developments in their field.
The second level is defined by general medical
publications such as the New England Journal
of Medicine (www.nejm.org) and the Journal of
the American Medical Association (http://jama.
ama-assn.org/). These publications highlight major
developments, including new product evaluations,
in all fields of medicine.
The next level of publications includes those that
address the sub sectors of the medical field, such as
the Journal of Cardiology, a journal that highlights
issues in the field of cardiology. It is in this arena,
where specialized decision makers, including doctors,
gain specific information regarding developments
within their fields. These publications are usually
run by the relevant academy or overseer of the field
(i.e. American Academy of Cardiology) and are
always referred to as journals not magazines. For
conventional hospital products, there are also specific
publications for GPO's as well. In certain areas there
can be further levels of specialization.
Understanding where in the supply chain customers
get their information can be critical. In addition, due
to the involvement of a broad scope of industries in
the medical field, appropriate publications may also
be found outside of the medical field, such as the
machine tools industry and the publication of choice
by medical device engineers.
Medical and scientific conferences are good venues
to present papers and findings, and will often result
in abstracts of the presentation being published
in top-tier medical journals. In the United States,
conferences have a competitive process for the
presentation of papers. Usually a "call for papers"
is announced well before the conference; for the
most prestigious conferences the call for papers can
be up to a year in advance. Submitted papers are
then reviewed by a committee which chooses the
presenters.
Of course, obtaining a publication in a leading
scientific journal is not easy, nor is coverage

of a company press release guaranteed. Each
publication has its own standards and procedures.
Clearly, the significance of the finding or product
development is a major determinant of whether or
not a publication publishes or cites the finding. On
the other hand, some publications work as private
businesses and offer citation coverage if a company
is willing to advertise or pay for the article. Peerreviewed articles, abstracts and citations, as well as
press coverage are important marketing tools for the
medical industry.
12.9. MARKETING PLATFORMS
Many industries in the U.S. are organized and
guided by societies consisting of the main players
within the industry and field. This association or
community of interest is also known as a platform,
and carries a great amount of importance in the
medical field. There are two types of platforms:
the medical academy and the industry association.
Both entities can host trade shows and conferences,
where members can exchange ideas, learn new
techniques from one another, network, exchange
industry information, and promote products and
services. These platforms are extremely important
for the medical device industry because they act
as the introduction point of new technologies
and products. These platforms can also decide
on new standards within the relevant industry.
Understanding where and when the major players
meet to create this "community of interest" is very
valuable when seeking interaction with opinion
leaders, doctors, partners, sales channels, and
information.
For companies looking at the U.S. medical device
market, it can be useful to map out the relevant
industry including all decision makers such as
doctors, medical scientists and engineers. In
addition, insurance reimbursement (see chapter 14)
is a major driver behind the acceptance of medical
devices. Therefore, identifying and using platforms
that foster the communication with key players is
important.
The main platform for all medical doctors is the
American Medical Association (www.ama-assn.
org), a not-for-profit association that plays the role
of advocacy (lobbyist) and advancement of the
healthcare field in general. Under the AMA are
the specialty academies of medical fields such as
the American Academy of Orthopedic Surgeons
(www.aaos.org). To be a member or fellow of
the academy you must be an orthopedic surgeon
and abide by certain admission criteria as well
as ongoing evaluations. A full list of all medical
academies begins on page 187.
86
Figure 55 Efficent Platforms for Information Exchange
Doctors
Regulatory Environment
Company
Research
Insurers
Manufacturers of medical devices have also come

together to create communities of interest. For
example, the Advanced Medical Technology
Association (www.advamed.org) advocates the
access for patients to new medical technologies as
well as reimbursement issues and much more. A list
of such associations is found in Annex II on page
179.
For the suppliers to specific medical device
industries and OEMs, focused platforms exist and
can be very useful venues to generate relevant
contacts and business leads.
12.10. LEVEL OF PRESENCE
The significant market demands have direct
ramifications on the level of presence a Swiss
supplier to the medical device industry may need.
Understanding the level of involvement necessary
in the clinical trial and publication process as
well as the level required to maintain customer
relationships, the appropriate level of customer
service, and the standard sales process will help

define the level of presence required. Obviously,
the undertaking will become more expensive as
the level of presence increases. Awareness of the
level of investment of the competition can provide
guidance on the resources required to maintain a
competitive presence in the market.
It can be challenging for the smaller manufacturers
to go up against the powerful sales forces and scale
advantages of the larger device manufacturers when
competing for contracts with large hospital supply
purchasing collectives and individual clinics and
physician offices. It can also be difficult to win big
contracts away from larger suppliers who have not
only invested time and money into the facility itself
but also into the purchaser, via clinical trial support,
training, etc. The reality of the U.S. medical
market is that the relationship between medical
device manufacturers and the purchasers, including
doctors and purchasing officers, is one of the most
important competitive elements.
Figure 56 Spectrum of Business Presence
As the level of service to market and customer increases
Exports to
Foreign
Customer
Independent
Representative
Agency
Distribution
Network
Joint
Venture:
Sales and
Service
Partnership
Wholly
owned
Sales and
Service
Entity
Wholly
owned
Manufacturing Sales
and Service
Own
Manufacturing Sales,
Service and
R&D
The cost of investment increases
A major vehicle for strong customer service is the presence of an aggressive sales and service team which works
very closely with the doctors, engineers and other purchasers in the field. The closeness of customer service
was so strong that the federal government recently took action to limit the customer service techniques and
training by suppliers that was perceived as ethically inappropriate. For example, some companies provided allexpense-paid training courses and other offers to entice doctors into endorsing their products.
When introducing new products, the relationship between the doctor and the sales/customer service
representative can be a vital communication channel. And, as hospitals move more towards a Just-In-Time
inventory system, delivery times become more and more important, necessitating high levels of communication
and interaction. All these indicators point to committed, eager, and proactive customer relations.
87
12.11. AVERAGE MARGINS

Medical device companies generally receive an above average net operating margin compared with the
average margin for the overall healthcare industry. Historically the reported margins of medtech companies
have been about 14 percent, approximately six percent higher than the healthcare industry as a whole.
The leading areas that are driving the growth include: cardiology devices, orthopedic implants, oncology
equipment, and surgical equipment. Therapeutic and diagnostic products tend to command the highest
margins. Market leaders such as Medtronic, St. Jude Medical, Boston Scientific, Zimmer, Synthes and Stryker
historically have generated operating margins in the 25-30 percent range. On the other hand, the hospital
supplies market is a mature market with commodity type products sold in high volumes at low margins.
12.12. CONSIDERATIONS FOR MARKET ENTRY
Figure 57: Testimonial: The U.S.A. - A Feasible Challenge
Many entrepreneurial companies with successful technologies, products or

services did not assess alternative solutions for a market entry prior to signing long
term distribution agreements with a representative in the US. In some cases, such
agreements gave the U.S: representative control of the regulatory process, and on
occasion, products and serv-ices were introduced to the market in absence of the
manufacturers brand name.
Agreements of this nature have significant disadvantages for the manufacturer.
Their lengthy duration locks the manufacturer into a long term commitment that
does not allow for termination in the event of unforeseen market challenges or an
unsatisfactory partner-ship.
Due to the challenging U.S. legal and regulatory culture, as well as other reasons,
Swiss companies may decide to refrain from establishing a wholly owned U.S.
subsidiary. How-ever, in my opinion, such a subsidiary may be the key to success
in the worlds biggest medical device market.
From my point of view and based on experience, a successful start-up in the U.S.
Med-Tech business requires the following considerations:
Access to people with expertise and superior knowledge of the U.S. market.
A plan to navigate the complex regulatory and reimbursement process (e.g., FDA
approvals and compliance, import licenses).
A clear definition of responsibilities between manufacturer and distributor (if
used) including:
o A contract containing parameters of mutual expectations in
view of per-formance (e.g., pricing structure, exchange rate criteria,
product position-ing versus competition, minimum sales volumes, etc.)
o Clear guidelines on the application of the brand name, and
other trade-marks and copyrights.
o A detailed exit clause in the contract.
o An understanding of U.S. distributors and sales agents perspective
about the risk of working with foreign suppliers.
Tax and transfer pricing policies when sales and marketing are the responsibility
of a wholly-owned U.S. subsidiary.
A clear reporting structure and contractual statutes for personnel hired by a U.S.
subsidiary.
Dr. med. Andreas Baenziger

MedWork AG
88
13. Marketing Agreements,

Strategic Partnerships & Licensing
Daniel A. Wuersch, Wuersch & Gering LLP
13.1. LEGAL ISSUES RELATED TO
MARKETING IN THE UNITED STATES
When a Swiss medical technology company
considers marketing its products or services in
the United States, it should not only research the
market opportunities and risks from a commercial
point of view, but also from a legal point of
view. In addition to the regulatory requirements
discussed in Chapter 17, and the laws governing
intellectual property rights discussed in 13.6 below,
the impact of a number of federal and state laws
(e.g., contracts, torts, and health care laws) on
the planned marketing activities and their tax
implications should be understood before beginning
active marketing in the United States.
With the advent of the Internet, companies who
have reason to believe that their products or
services may reach customers in the United States
should consider these issues even if they do not
plan to actively market their products or services
in the United States. To avoid any surprises, these
companies should consult with legal counsel as to
the developing law governing online contracts and
adapt the limitations of warranties and liabilities
in their general terms and conditions to meet the
stringent requirements of U.S. law (see 13.2 below).
Swiss medical technology companies should
approach the complexity of the U.S. legal system
with sufficient respect. However, with careful
planning, risks and the impact of government
regulation can be reduced to a manageable level in
most cases.
Like Switzerland, the United States constitution
established a federal system in which the 50
states (and the District of Columbia) maintain
considerable autonomy. Certain areas of the
law fall both within the scope of authority of
the federal and the state governments, including
income tax laws, unfair trade laws, anti-trust laws,
and trademark law. Other areas are exclusively
governed by federal law (e.g. patent law) or state law
(e.g., contracts and general tort law). Thus, no less
than 52 legal systems can govern the marketing of
medical products or services in the United States,
each with a multitude of potentially applicable
statutes, regulations, and court decisions.
parties, such as joint ventures or subsidiaries.

Agents are independent contractors who solicit sales
of products or services of a domestic or foreign
company for a commission, typically calculated as a
percentage of gross sales. Distributors and resellers
purchase goods or services from a manufacturer or
service provider and resell them at a mark-up to
other distributors, wholesalers or retail customers.
If the product consists of intellectual property
rights (e.g., software), a master licensee assumes the
role of a distributor vis--vis its sub-licensees.
It is not uncommon for the arrangement
between a manufacturer or service provider and
its intermediaries to encompass several legally
significant relationships. For example, a distribution
agreement can include elements of an agency
relationship for certain products or services,
a license to use intellectual property, and an
agreement to provide services for the manufacturer
or service provider (e.g., training customers, or aftersales servicing).
13.3. MARKETING THROUGH A
U.S. SUBSIDIARY OR BRANCH
In the course of its activities in the United States, a
Swiss medical technology company may determine
that it would be beneficial to establish a physical
presence in the United States to more effectively
market its products, for regulatory reasons or to
ensure the quality of customer training or servicing.
For Swiss companies, a subsidiary in the form of a
corporation, rather than a branch (or a subsidiary
in the form of a transparent entity for tax purposes),
typically is the desirable form for a physical
presence in the United States. Otherwise, the Swiss
parent company may directly become subject to
taxation in the United States. Prior to forming
a U.S. subsidiary and structuring its relationship
with the Swiss parent the impact of the rules of
international taxation contained in the Internal
Revenue Code of 1986 (including the transfer
pricing regime pursuant to Section 482) and the
Swiss-U.S. Income Tax Treaty of October 2, 199688
should be understood.
13.4. GENERAL CONTRACT ISSUES
Contract Law in the United States
13.2. MARKETING ARRANGEMENTS

Swiss companies can either actively market
their products in the United States on their own
or through intermediaries, including agents,
distributors or resellers. These intermediaries
can either be independent third parties or related
The law on contracts is state law. Except for

Louisiana, all states and the District of Columbia
follow the English common law tradition, in which
case law (court decisions), rather than statutes
traditionally determined the law. Despite its roots
89
in the English common law, the case law is often

supplemented (but not replaced) by statutes (e.g.,
New York General Obligations Law of April 23,
1963 (GOL); California Commercial Code,
effective as of January 1, 1965; Chapter 106 of the
General Laws of Massachusetts). An important
statute, which has been adopted by all states (with
certain exceptions and modifications) is the Uniform
Commercial Code (UCC), a uniform statute drafted
by the National Conference of Commissioners
on Uniform State Laws in partnership with the
American Law Institute (see www.nccusl.org). In its
Article 2 (which was not adopted by Louisiana), the
UCC establishes the rules applicable to contracts
for the sale of goods. The United States is also a
party to several treaties that can apply to a contract
between a Swiss and a U.S company (e.g. the
Vienna Convention on the International Sale of
Goods of 1980).
The conflict of laws rules of the states determines
which state law applies to a contract between
residents of different states (or foreign countries).
These rules generally permit the parties to a
contract to select the law that shall govern their
relationship. In the absence of a choice of law by
the parties, courts will decide which law has the
most significant relationship with the contract in
question.
The parties may also choose the courts or
arbitration forums that have jurisdiction over any
disputes arising in connection with their contract.
Otherwise, the jurisdiction of the various state
courts is determined by the so called long-arm
statutes of the states and by the jurisdictional
provisions of the Rules of Civil Procedure for the
federal courts. According to these rules, the federal
courts have jurisdiction in contract disputes between
a U.S. and a foreign company if the amount in
dispute exceeds $70,000. Alternative dispute
resolution (such as arbitration or mediation) is
often used to resolve contract disputes. Arbitration
rules that are well established include those of
the American Arbitration Association (AAA)
and, for international contracts, the rules of the
International Chamber of Commerce (ICC).
Because there is no uniform statutory law that
regulates all aspects of contract law and contracts
are interpreted strictly based on the language
in a written agreement (parole evidence rule),
American contracts tend to be longer and more
comprehensive than their European counterparts.
Despite the understandable desire to keep contracts
short and simple, a Swiss medical technology
company that enters into a contract with a U.S.
business partner should be aware of the risks that
can result from an incomprehensive contract.
Contractual Risk Allocation
Most commercial risks can be freely allocated to
either party in an agreement. However, there are
limitations. For example, common law does not

permit a party to deny responsibility for willful
misconduct or gross negligence. In addition, while
limitations for statutory or tort liability can be
limited vis--vis a contract party, these limitations
are not effective vis--vis third parties (e.g. liability
for defective products, infringement of intellectual
property rights).
Implied Covenants and Warranties
A contract party may not only be liable for
commitments and representations expressly made
in a contract, but also for implied covenants and
warranties. For example, UCC Article 2 provides
that in every contract for the sale of goods there
is an implied warranty that title to the goods is
transferred to the buyer. In a contract for the
sale of goods by a merchant, implied warranties
of merchantability and fitness for a particular
purpose are deemed to be given, except where
these warranties are conspicuously disclaimed with
language prescribed in UCC Article 2.
Regulatory Issues
To avoid inadvertent violations of regulatory rules
and regulations (e.g., FDA rules), appropriate
conditions to the performance of a contract (e.g.,
filing a 510(k) pre-market notification with the
FDA) and covenants to comply with these rules
(e.g., observing GMP) may be required. In some
instances, regulatory authorities prescribe specific
obligations that must be imposed on a contract
party.
13.5. EXPLORING AND EVALUATING
MARKET OPPORTUNITIES
Confidentiality Agreements
For a manufacturer of a medical device, a developer
of software with applications in medical technology
or a provider of services to the health care industry,
entering into a confidentiality agreement with a
potential business partner in the United States is
an absolute must before any serious discussions
are held on a future cooperation. Otherwise, the
potential partner is not restricted from publishing
this information or from using the confidential
information for its own purposes. To ensure the
enforceability of a confidentiality agreement, the
information covered must be described as precisely
as possible and may not include non-confidential
information. Because damages resulting from the
violation of a confidentiality agreement are difficult
to prove, confidentiality agreements should specify
that injunctive relief is available to remedy any
violation of the agreement.
Under U.S. rules of civil or criminal procedure
and certain laws and regulations, confidential
information may, however, be required to be
disclosed to third parties or governmental
90
authorities. In order to avoid a violation of

a confidentiality agreement, confidentiality
agreements typically permit the disclosure of
confidential information in these circumstances.
13.6. MARKETING AND LICENSING OF
Consulting Agreements
Agreements for the sale or delivery of products

to U.S. customers are generally governed by
UCC Article 2. Therefore, limitations of implied
warranties must follow the UCC Article 2 rules
mentioned in 13.2 above. The licensing of software
is not governed by UCC Article 2. However, it
is good practice to follow the UCC format for
limitations of warranties and liability in these
contracts as well (in particular vis--vis end users).
During the evaluation and market development

phase, it may become necessary to engage
consultants in the United States. Consultants
typically perform services for a time-based flat fee, a
performance based compensation or a combination
of the foregoing. Generally, the terms of these
agreements should permit an easy termination of
the relationship and clear milestones that define
the expected results. Consultants should be bound
by a confidentiality agreement (which can either
be part of the consulting agreement or a standalone agreement), and the consulting agreement
should specify that any work product created by
the consultant belongs to the client (see below).
Depending on the circumstances, an exclusivity and
possibly a non-compete clause may be appropriate
elements of a consulting agreement.
Development Agreements
A Swiss manufacturer may enter into a development
agreement with a U.S. engineering firm if a medical
device requires modifications for the U.S. market.
Conversely, a U.S. marketing company may
enter into a development agreement with a Swiss
manufacturer or service provider who has unique
know-how or expertise in a specific area. In a
development agreement, the scope and purpose of
the project, the instructions to be observed, as well
as any modifications of these instructions need to be
clearly and conclusively described. An important
area to be addressed is the ownership of intellectual
property used to develop the work product and
any improvements thereto (see 13.6 below). A
developer has a legitimate interest in maintaining
control over its know-how. The principal on the
other hand must make certain that it can freely use
the work product in the desired manner without
any interference from the developer or third parties.
Other aspects that the parties should consider
are similar to those encountered in consulting
agreements.
Products and Know-how in the United States

Product Sale and Delivery Agreements
UCC Article 2 also contains a special rule for

battles of the forms, i.e., situations where the
general terms of a seller and those of a buyer
contradict each other. Under the common law
mirror image rule, a valid contract can only
be formed if offer and acceptance are identical
(i.e. the mirror image of each other). Under the
UCC rule, an acceptance which contains terms
that are different from those contained in the offer
can lead to a valid contract if the new terms do
not materially alter the offer and the offer did not
expressly limit the acceptance to the terms of the
offer. To avoid being bound by unexpected terms,
general terms and conditions should contain such
a limitation. Swiss medical technology companies
should also be aware that large U.S. companies
typically require strict adherence to their terms of
purchase or sales.
Outbound Service Agreements
The issues that arise in outbound service
agreements, i.e., agreements in which a Swiss
company agrees to provide services to a U.S.
principal, are similar to those discussed for
consulting and development agreements under
13.5 above, including in particular the allocation of
liability risks in particular. Because there is no strict
liability for errors that occur in providing services, a
limitation of liability to a negligence standard with
which a Swiss service provider feels comfortable
(e.g., gross negligence) can be an effective tool to
limit its liability.
Agency Agreements
The developers liability for defects of the work

product and damages arising out of its use should
be limited to those for which the developer can
reasonably be held responsible. Because the
developer runs the risk of being held liable for
damages beyond its control and the principal could
become responsible for failures of the developer,
the parties should make certain that these risks are
allocated fairly in the agreement. Although neither
the developer nor the principal can escape liability
to third parties completely, a carefully drafted
contract can substantially reduce the risk that either
party becomes responsible for mistakes of the other.
As briefly described in 13.2, an agent is retained

to solicit offers from U.S. buyers (or licensees) in
consideration for a commission. The amount and
type of commission varies greatly, depending on
the product, the expected volume, exclusivity and
other factors. When structuring agency agreements,
it is important to create incentives for the agent to
maximize the sales for the principal. This can be
achieved through a tiered commission structure
based on sales volume and penalties for the agents
failure to reach a minimum level of sales (e.g., loss
of exclusivity for a particular territory, reduced
commissions, etc.).
91
Because the agency relationship may not be clear

to a customer (or the general public), the agreement
should clearly define the role of the agent and
specify that the agent is not authorized to commit
the principal or make unauthorized representations
on its behalf. Otherwise, the principal could
become liable for unauthorized promises or
warranties made by the agent to third parties. The
agent, on the other hand, risks that it will likely
be attacked first if problems with a product result
in liability claims in the United States. Agents
therefore have a legitimate interest in limiting their
liability to acts for which they can reasonably be
held responsible and in securing the support of
the principal in defending such claims (including
indemnification for costs and damages).
Distribution Agreements
The issues arising in connection with distribution
agreements are in many respects similar to those
discussed with respect to the agent. As in an agency
agreement, a distribution agreement should contain
restrictions on the representations and warranties
that a distributor is authorized to make vis--vis its
customers. The distributor, on the other hand, will
have similar liability concerns to those of an agent.
However, distribution agreements can create
additional issues under applicable intellectual
property law and the federal anti-trust laws.
Because a distributor will use the intellectual
property rights of a Swiss manufacturer (including
its trademarks and patent rights), the issues
discussed below should be considered when
structuring the relationship with a U.S. distributor.
Antitrust concerns include prohibited price fixing,
and exclusion of third parties from competition.
Licensing Agreements
The licensing of intellectual property and knowhow is not only an effective tool to market medical
technology in the United States, but also an element
of many of the other types of agreements discussed
in this chapter.
Patent Licenses
Pursuant to the federal Patent Law, the owner of
a U.S. patent has the right to exclude others from
making, using, selling and offering the technology
or invention claimed in the patent for up to 20
years. The owner of a valid U.S. patent can license
any or all of these rights to a third party within a
specified territory and for a specified time period.
Because the patent has a limited life, a patent license
cannot extend beyond the life of the patent. A
patent license may also not restrict the licensee from
challenging the validity of the patent. A patent
license may need to address the ownership of future
inventions based on the patents (improvements).
Without an agreement to the contrary,
improvements are owned by the licensor. Thus, any
modification of this rule must be specified in the

license agreement.
Copyright Licenses
Under the 1976 federal Copyright Act, the author
of any original work automatically becomes
the owner of the copyright without any need to
register the copyright in the United States. Areas
in which copyrightable work may be created by or
for a medical technology company include software
programs, marketing brochures and Website
design. Like a patent, a copyright can be licensed
to third parties for the duration of the copyright
(which usually lasts for decades). To be effective
under U.S. law, any transfer or license of rights in a
copyright must be in writing. If copyrightable work
is created by an independent contractor (consultant,
developer, etc.), the copyright in this work does
not automatically belong to the principal, but may
need to be contractually licensed or assigned to the
principal.
Licensing of Trademarks
and Service Marks
Under the federal Lanham Act, trademarks
(used to distinguish goods) or service marks (used
to distinguish services) can be registered in the
U.S. Patent and Trademark Office. Through
registration, the owner of the mark is permitted
to use the symbol in connection with the
registered mark. Use of the symbol without
a valid registration is prohibited in the United
States (instead the TM symbol may be used with
unregistered marks). A trademark registration is
prima facie evidence of the exclusive ownership of
a mark.
However, both under the Lanham Act and under
state law, rights in trademarks or service marks
are created through the simple use of a mark in
commerce.
A trademark or service mark license is similar in
nature to a patent license. However, there are
crucial differences. Unlike a patent, a trade or
service mark does not per se have a limited life.
However, the owner of a trade or service mark can
lose its right (or the value of its mark) if it permits
the use of the mark by unauthorized persons or in
a manner that diminishes the value of the mark.
Therefore, a license agreement must permit the
licensor to monitor the quality of the goods and/
or services that the licensee sells under the licensors
mark, and the licensor must in fact exercise its
control rights. The licensor can also lose the
protection of its mark if the license does not provide
that all goodwill created in the mark by the licensee
inures to the benefit of the licensor.
92
Licensing of Know How and Trade Secrets
Supply Agreements
The issues that must be addressed in licenses of

know-how or trade secrets are similar to those
discussed with respect to confidentiality agreements
under 13.5. It is important to remember that the
protected property may not be publicly available
and needs to be carefully defined in the license
agreement. Because the confidential information
is revealed to the licensee for the purpose of a
commercial activity, the transfer of the know-how
or trade secrets, the scope of authorized users, the
duty to maintain the information confidential, and
the return of the confidential information at the end
of the license term should be clearly regulated in
the agreement. A know-how license does not need
to have a time limitation. However, the publication
of confidential information or the loss of its value
may make a know-how license unenforceable.
In a supply agreement, the customer is primarily

concerned with securing the timely supply of raw
material or product components at the desired
quality and the allocation of liability to the supplier
for damages resulting from defective or inadequate
material supplied. The supplier, on the other hand,
is interested in being excused from performing
its obligations in the event it becomes unable or
commercially unreasonable to adhere to the terms
of the contract and in limiting its liability for the
use of the supplied material or components to the
maximum extent possible.
13.7. Cooperation with U.S. Companies

Manufacturing and OEM Agreements
In a (toll) manufacturing agreement, a company
outsources the manufacturing of a product to a
third-party manufacturer. Because the principal
makes valuable intellectual property and knowhow available to the toll manufacturer, toll
manufacturing agreements raise many of the issues
discussed under 13.5 and 13.6 above. In addition,
maintaining the quality of the manufactured
products, adherence to manufacturing guidelines,
timely delivery (and payment) and regulatory
requirements and a fair allocation of liability rights
are primary concerns that need to be addressed in
these agreements. Product liability can become a
tricky issue in toll manufacturing agreements. The
allocation of the liability risk for manufacturing
and design defects should follow the law that has
developed in this area. However, this can result in
a joint liability to third parties of both the principal
and the manufacturer in certain cases.
An original equipment manufacturer (OEM)
agreement permits a company to sell a product
made by a third party manufacturer under the
companys own brand name. The intellectual
property clearly stays with the manufacturer, but the
OEM reseller may negotiate for (limited) exclusive
marketing rights. Other concerns that OEM
resellers have are similar to those of the principal
in a toll manufacturing agreement. With respect
to product liability, the ultimate responsibility
for design and manufacturing defects should be
allocated to the manufacturer in all cases (unless the
product has been modified according to instructions
of the OEM reseller). Despite a contractual
allocation of this risk, the OEM resellers exposure
remains significant. Not only can it be held
responsible for marketing the defective product, but
any problems could tarnish its brand name.
Support and Inbound Service Agreements

The issues arising in support and inbound service
agreements (e.g., agreements for the provision of
maintenance services on a Swiss manufacturers
products in the United States) have mostly been
covered under Consulting Agreements in chapter
13.5 and from a different perspective in 13.6
(Outbound Service Agreements). Adherence to
maintenance and repair guidelines, training in
handling equipment and products and compliance
with regulatory requirements should be regulated in
detail in these types of agreements. The concerns
of a U.S. service provider with respect to possible
claims by U.S. customers of the foreign principal
can be similar to those of an agent, distributor or
licensee.
Joint Ventures
Joint ventures can be formed for purposes of
developing, manufacturing, or marketing products
or services. Contrary to the agreements discussed
so far, the common denominator for all types of
joint ventures is the achievement of a common
purpose by two or more parties through a joint
decision making process. Joint ventures can be
mere contractual arrangements among parties
or take the form of legal entities operated for the
common purpose of the joint venture. The decision
making process, supervision and monitoring of the
joint ventures activities, ownership and protection
of intellectual property and the rights and
obligations of the parties in the event of a breakup or sale of the joint venture (or interests therein)
are key issues that should be addressed in a joint
venture arrangement. Because unincorporated joint
ventures are generally treated as partnerships for
tax purposes, Swiss companies should consider that,
absent a proper structure, their participation could
subject them to U.S. taxation (see 13.3 above).
13.8. ACQUISITION OR DISPOSITION
OF U.S. COMPANIES OR ASSETS
As part of its strategy to enter (or expand in) the
U.S. market, a Swiss medical technology company
may consider acquiring a U.S. company or its assets
(such as intellectual property rights or research
or production facilities). A Swiss company that is
already present in the United States
93
may dispose of a U.S. subsidiary or assets, or its

shareholders may decide to sell the company to
a U.S. purchaser. These agreements are typically
extensively negotiated by the parties and their
respective counsel. In addition, complex rules of
U.S. corporate and securities law may need to be
considered. Therefore, a comprehensive discussion
of the plethora of issues that arise in the context
of these transactions would go beyond the scope
of this chapter. Nevertheless, the following key
considerations apply generally to these types of
transactions:
Prior to entering into serious discussions about an
acquisition or disposition of a company or assets, a
mutual confidentiality agreement, possibly coupled
with a right of exclusivity for a certain period of
time should be signed. This not only protects the
know-how and trade secrets of the parties, but
avoids the untimely publication of a potential
transaction. However, Swiss companies need to be
aware of the fact that U.S. public companies may
be compelled by U.S. securities law to disclose a
proposed transaction (see also 13.5).
Prior to completion of any acquisition of a
company or investment assets, the buyer should
conduct a thorough due diligence of the acquisition
target from a business, technical, legal and financial

standpoint. Responding to a due diligence request
can lead to disruption of the sellers operations and
uncertainties among its employees. To minimize
the impact on the sellers business, careful planning
of the due diligence process by the buyer and the
seller is required.
The U.S. taxation of stock or asset acquisitions/
dispositions is very complex and involves
many issues both on the federal and state level.
Depending on the structure of the transaction, the
tax effects on the buyer and seller can differ widely.
If U.S. securities (such as shares or notes) are
issued to a Swiss company, these securities will likely
be subject to resale restrictions under the federal
securities laws that can limit the public resale of
these securities for years.
As in all other agreements discussed in this
chapter, the parties should assume that their
recourse for a breach of the agreement against
each other is limited to the remedies set forth in the
contract. Therefore, any issues that are considered
essential should be conclusively addressed in the
acquisition or disposition agreement.
14. Reimbursement
14.1. OVERVIEW
Reimbursement by public and/or private insurance
is one of the primary drivers that can affect the
successful introduction (or failure) of new medical
devices in the U.S. market. Since most patients
cannot afford to pay for medical devices and
procedures on their own, they rely on insurance to
pay about 88 percent of all healthcare expenses.
(Figure 10, page 27). This being the case, public
insurance (through federal and state Medicare and
Medicaid programs) as well as a large number of
private insurance companies have a major voice in
deciding which medical devices and procedures they
agree to pay for, and how much they are willing
to pay. The public and private sectors operate
independently from each other, and each makes
its own decisions regarding which devices and
procedures it considers eligible for reimbursement.
On the public side, The Centers for Medicare and
Medicaid (CMS) takes the leading role in making
decisions while on the private side the individual
companies conduct their own reviews and make
their own decisions. It is also important to point
out that CMS is making a steady drive to become
an active purchaser rather than a passive payer of
healthcare.
In order for Swiss medical device manufacturers to
successfully introduce new products into the U.S.

market, it is important they understand the various
major components, entities, and market dynamics
that affect the payment and reimbursement for
medical products.
14.2. RELATIONSHIP OF PATIENTS,
PROVIDERS, AND PAYERS
Generally, there are three primary entities that are
ultimately involved in the healthcare transaction:
(1) the patients who receive the healthcare services;
(2) the healthcare providers (i.e. doctors, nurses,
laboratories, hospitals, outpatient centers, etc.) who
provide the services; and (3) the insurers (public and
private) who pay for the services. In most cases, the
patients are required to bear a part of the total cost
through deductible and/or co-payment amounts,
but insurance usually covers a considerable portion
of the overall costs. Nevertheless, the patient is
ultimately responsible for all amounts owed to
healthcare providers that are not paid by the insurer.
Healthcare providers generally contract with
both public and private payers to provide services
at a specified maximum amount, and accept
payment for the contracted amount as payment in
full. Healthcare providers may then bill patients
separately for the contractual co-payment and
94
deductible amounts not paid by the insurance

provider, but they may not charge patients for
any residual amounts above the contractual
price. For example, if a doctor charges $5,000
as a standard price to perform a surgery, he may
have a discounted contractual price with various
public and private payers. If he accepts Medicare
reimbursement, he may only receive $3,000 from
Medicare if that is the maximum amount of
reimbursement Medicare will pay for the specific
type of surgery. The doctor must accept that
amount as full payment. However, if Medicare
allows $3,000 for the surgery and only pays the
doctor $2,400, (i.e. 80%), Medicare will inform the
doctor the patient is responsible for the additional
$600 because of the 20% deductible or co-payment
amount. In this case then, the doctor may bill
the patient directly (or his supplemental insurance
company) for the additional $600. This process
would be similar for private insurance except that
the negotiated maximum amounts for procedures
may vary. Most healthcare providers accept a
number of different insurance policies.
14.3. REIMBURSEMENT
Reimbursement has become an increasingly
important consideration in the development
and marketing of medical devices. In its role
as the largest single healthcare insurer in the
U.S., Medicare has a significant influence on the
healthcare market. The Centers for Medicare and
Medicaid Services (CMS) formulates national and
local coverage policy and sets reimbursement rates
for facility and physician providers. In the area of
commercial payers, managed care organizations
cover approximately 200 million individuals in the
U.S., and these payers often follow the lead set by
CMS when determining their own coverage and
payment guidelines. Regardless of the payer, three
basic steps must occur for the product or procedure
to be considered reimbursable: (1) payers must
consider the product or procedure as a part of
a covered set of benefits; (2) a billing code must
exist or be established to identify the product or
procedure; and (3) payment must be assigned for the
code. In general, the complexity and integration
of these processes are significant challenges
for manufacturers seeking to bring products to
market. This being the case, it is important for
manufacturers to work with decision makers which
include government agencies, specialty medical
societies and public and private payers.
Ultimately, in the U.S., approval of a medical device
for marketing by the FDA does not guarantee
that a third party payer (e.g. Medicare, insurance
company, health plan) will provide coverage and
reimbursement for that device. Often, payers either
perform or contract out for technology assessments
to determine the cost-effectiveness of covering a
particular device. Since each third party payer has
its own process to reach coverage decisions, it is

recommended that a medical device manufacturer
take up direct contact with those entities that are
directly involved in the evaluation and decision
process. Listed below are the addresses and
phone numbers for the Centers for Medicare and
Medicaid Services, the National Blue Cross/Blue
Shield Technology Evaluation Center, the American
Association of Health Plans (which represents
many of the private insurers and health plans in
the U.S.), and ECRI (an independent, nonprofit
health services research agency that performs many
technology assessments for the insurance industry).
Mr. Jonathan Blum
Deputy Administrator & Director
Center for Medicare
7500 Security Blvd.
Baltimore, MD 21244-1850
Tel: 410-786-3000
www.cms.hhs.gov/
Ms. Naomi Aronson, PhD
Executive Director, Technology Evaluation Center
Blue Cross/Blue Shield Association
225 North Michigan Ave.
Chicago, IL 60601
Tel: 312-297-5530
www.bcbsa.com/tec/index.html
Ms. Karen Ignani
President and CEO
Americas Health Insurance Plans
601 Pennsylvania Ave. NW
South Bldg., Suite 500
Washington, DC 20004
Tel: 202-778-3200
www.ahip.org/default.aspx
Mr. Jeffrey C. Lerner PhD
President and CEO
ECRI
5200 Butler Pike
Plymouth Meeting, PA 19462-1298
Tel: 610-825-6000
www.ecri.org/
In the meantime, efforts are being made to
streamline and integrate the FDA device approval
process together with the CMS coverage
determination process. The FDA announced on
September 16, 2010 that it is proposing a new
process to review medical products that would be
done in tandem with the CMS in an effort to help
speed up coverage decisions. Under the proposal,
the FDA would review and make approval decisions
alongside the CMS, which decides whether and
how to pay for new medical products for its elderly
and disabled patients once they are approved for the
U.S. market. To start, the agencies have proposed
a pilot project for devices after both FDA and CMS
have reviewed public comments on the proposal.89
95
14.4. ROLE OF INSURANCE

Reimbursement for new technology is a major
concern for providers, patients, the physician
community and medical technology innovators.
The process can be complicated and reimbursement
is affected by things such as the site of service and
the type of device used as well as other factors.
In addition, clinical trials play a vital role in the
development and approval for coverage of new
medical technologies.
Medicare and most other insurers typically
reimburse physicians based on fee schedules tied
to Current Procedural Terminology (CPT) codes.
CPT codes are published by the American Medical
Association and are used to report medical services
and procedures performed by or under the direction
of physicians.
Medicare reimburses hospitals for outpatient
stays (typically stays of less than 24 hours) under
Ambulatory Payment Classification groups (APCs).
Medicare assigns a procedure to an APC based on
the billed CPT code. (Many private insurers require
International Classification of Diseases, 9th revision
(ICD-9) for outpatient procedure codes payment.)
Many insurers, including Medicare, use a 24-hour
length of stay to define inpatient hospital care. A
Diagnosis-Related Group (DRG) is a system of
classifying patients based on their diagnoses and the
procedures performed during their hospital stay.
(CMS), which runs the Medicare program, uses
DRGs to determine how much to pay hospitals for
treating Medicare patients who receive inpatient
care. Private payers may also pay hospitals using
DRG-based systems for providing inpatient services.
Each of Medicares 500+ DRGs is assigned a single,
fixed payment rate. That payment rate reflects the
national average cost of caring for patients with
similar clinical characteristics who require similar
resources (services, supplies, devices, etc.) for their
treatment during their hospital stay. However,
actual Medicare payments for specific procedures
may vary depending on each provider and
institution, geographic differences in costs, hospital
teaching status, and proportion of low-income
patients.
Many procedures are also performed outside of
the hospital in free-standing clinics. Payments
made to free-standing clinics from private insurers
depend on the contract the clinic has with the
payer. Medicare payments to free-standing clinics
are determined in part, by the licensing status of
the clinic. If a free-standing clinic is licensed by
Medicare as an Ambulatory Surgical Center (ASC),
it is eligible to be reimbursed for select procedures
provided in this setting. Not all procedures that
Medicare covers in the hospital setting are eligible
for payment in ASCs. Medicare has a list of all
services (as defined by CPT code), generally nonsurgical, that it covers in the ASC setting. These
services are classified into nine payment groupings

to determine reimbursement.90
Currently, private insurance is the expected means
of payment in about 35 percent of the cases while
Medicare is the expected means of payment in
about 20 percent of the cases. Medicaid accounts
for about 10 percent of the cases and self-pay about
4 percent. With an aging population in the U.S.,
the percentage of cases paid by Medicare can be
expected to increase over the next 10 years.
Recent Developments: The U.S. Healthcare
industry is in the process of transitioning from
the ICD-9 to the ICD-10 classification system for
medical diagnosis and inpatient procedure coding.
The compliance date for implementation of the
ICD-10-CM/PCS Coding System is October 1,
2013 for all covered entities. These entities include
healthcare providers, payers, software vendors,
and clearinghouses/third-party billers. Claims
for services provided on or after this date must use
ICD-10 codes for medical diagnosis and inpatient
procedures. CPT codes will continue to be used for
outpatient services.91
The 2009 U.S. economic stimulus law has
allocated $1.1 billion ($400 million to the National
Institutes of Health, $300 million to the Agency for
Healthcare Research and Quality, and $400 million
to the Department of Health & Human Services)
for research comparing the effectiveness of medical
treatments including drugs and devices. Some
industry observers believe the government funded
research inevitably will be used to decide insurance
coverage.92
14.5. PRIMARY TYPES OF PRIVATE
INSURANCE COVERAGE
In the U.S., there are many health insurance
providers which offer a wide range of coverage
options for individuals, families, self-employed
persons, small businesses, and groups. In
general, these providers pay for medical costs
when the insured person becomes sick or has an
accident. There are three primary types of health
insurance as follows: (1) Basic medical insurance,
which covers hospital fees up to a set amount;
(2) Major insurance, which provides coverage
after a deductible amount is reached; and (3)
Comprehensive insurance, which is a combination
of basic and major insurance where both doctor
visits and hospital fees are covered. Within these
three primary types of insurance, there is a subset
of categories that includes: (1) Indemnity plans; (2)
Health Maintenance Organizations; (3) Preferred
Provider Organizations; and (4) Point of Service
Plans.
Indemnity Plans offer the most freedom of
all the plans, but they also carry some additional
risk. Indemnity plans allow a person to pick his/
her own doctor (including specialists), but the plans
can be expensive and time consuming if the policy
96
is frequently used. In addition, these plans can

sometimes require the insured person to pay for the
costs out of pocket and then be reimbursed.
A Health Maintenance Organization (HMO)
is a healthcare system that assumes or shares both
the financial risks and the delivery risks associated
with providing comprehensive medical services to
a voluntarily enrolled population in a particular
geographic area, usually in return for a fixed,
prepaid fee. HMOs generally use a managed care
approach which integrates both the financing and
delivery of healthcare within a system that seeks
to manage the accessibility, cost, and quality of
that care. The plans offer a wide range of health
benefits including preventative care for a fixed
monthly fee. HMOs provide members with a list of
doctors they can choose from. However, the insured
must go through a primary care physician before
the person can go to a specialist. As such, HMOs
do not provide the insured total freedom of choice
to choose any doctor or hospital they would like.
Preferred Provider Organizations (PPOs) are
essentially a combination of indemnity plans and
HMOs, and are a healthcare benefit arrangement
designed to supply services at a discounted cost by
providing incentives for members to use designated
healthcare providers (who contract with the PPO
at a discount), but which also provide coverage for
services rendered by healthcare providers who are
not part of the PPO network. As such, the insured
has the option to seek medical services outside the
network, but usually with a higher deductible and
co-pay.
Point of Service (POS) Plans attempt to combine
the freedom of a PPO with the lower cost of an
HMO. It is based on the basic managed care
foundation: lower medical costs in exchange for
more limited choice. POS plans are different
from PPOs in that when enrolled in such a plan,
the insured must choose a primary care physician
to monitor his/her healthcare, but this primary
care physician must be chosen from within the
healthcare network. The chosen physician then
becomes the point of service. The POS physician
may then make referrals outside the network, but
then only partial compensation will be offered by
the health insurance company.
Following is a list of some of the leading private
health insurance companies in the U.S. (with links):
Aetna
www.aetna.com/index.htm
Beechstreet
www.beechstreet.com/
Blue Cross Blue Shield
www.bluecares.com/
Cigna
www.cigna.com
Coventry Health Care
www.coventryhealthcare.com
HealthSmart Preferred Care
www.healthsmart.net
Humana
www.humana.com
Kaiser Permanente
www.kaiserpermanente.org
PacifiCare Health Systems
www.pacificare.com
United Healthcare Group
www.uhc.com
WellPoint Health Networks
www.wellpoint.com0
14.6. TRENDS IN THE
MANAGED CARE INDUSTRY
According to the Wall Street Journal, the managed
care industry has been experiencing consolidation
over the past decade and it is expected to become
more concentrated in the coming years. In 1995,
the top 10 U.S. health plans accounted for 27%
of medical membership, however in 2008; they
accounted for about 56% of medical membership.
Some of the nations independent nonprofit Blue
Cross and Blue Shield (BCBS) organizations that
did not seek for-profit status back in the 1990s
and early 2000s are starting to feel pressure from
large national health insurers to convert to forprofit status or merge with other independent
organizations. Nonprofit BCBS organizations
and smaller health insurers are having a more
difficult time competing against larger providers
because of the need for economies of scale and the
requirement for greater investments in expensive
technologies and tools to comply with laws. Even
if they do not merge with other independents,
conversion to for-profit status could lead to
acquisitions by large insurers. The independent
BCBS organizations are attractive acquisition
candidates for the large insurers because they are
considered to have the best operations and the most
people covered.93
Cost containment is also a high priority. Payers are
focusing on healthcare cost containment to control
spending. Some of the leading efforts include: (1)
Evidence based medicine; (2) Consumer-driven
healthcare plans; (3) Step therapy; and (4) High
deductible health plans.
Effective no later than January 1, 2013 the newly
passed Affordable Care Act establishes a national
pilot program to encourage hospitals, doctors, and
other providers to work together to improve the
97
coordination and quality of patient care through

the creation of Accountable Care Organizations
(ACOs).94 The new concept is intended to provide
coordinated healthcare under one umbrella. The
idea is that ACOs will replace the current fee-forservice system by integrating primary care doctors,
specialists, hospitals, labs and other healthcare
services under one umbrella to deliver more efficient
healthcare to patients at a lower cost. Incentives
are being offered to healthcare professionals in
these groups whereby they could receive monetary
rewards from Medicare if they meet certain cost
and care goals. A number of healthcare systems are
already working toward becoming ACOs over the
next several years. Memorial Hermann Healthcare
System based in Houston, Texas will likely be one
of the first healthcare organizations to become
an ACO with a target date of January 2012. No
one knows how ACOs will work out and there are
still many factors that could negatively affect the
introduction of the new model. Two leading factors
include (1) the new Congress could modify the law,
or (2) there are many rules and regulations that
still need to be developed which will have a direct
influence on any new ACOs.95
14.7. MEDICARE AND MEDICAID
The public insurance sector is made up of two
primary components: Medicare and Medicaid.
Medicare is the national health insurance program
which provides coverage to approximately 46.3
million Americans. Everyone who pays U.S. Social
Security taxes pays a portion to this program, and
is thus entitled to benefits. Covered individuals
include people age 65 or older, some people under
age 65 with disabilities, and people with kidney
failure. The Centers for Medicare and Medicaid
Services (CMS) is the federal agency, which
administers the Medicare Program. Medicaid is a
program that pays for medical assistance for certain
individuals and families with very low incomes. The
program is jointly funded by the federal and state
governments to assist states in providing long-term
medical care assistance to people with low incomes
and limited resources.
In order for procedures and medical devices to
be reimbursed by the U.S. Federal Government
under its Medicare program, the specific services,
procedures, or technologies should be listed in the
Medicare Coverage Database (www.cms.hhs.gov/
mcd/indexes.asp). In the absence of a specific noncoverage instruction, and where a medical device
has been approved for marketing by the Food and
Drug Administration, in many cases, contractor
(Physician) discretion may be used to determine
whether a procedure performed with a medical
device is reasonable and necessary and, therefore,
covered.
14.8. COVERAGE DESCRIPTIONS

National Coverage Determination
A National Coverage Determination (NCD) is one
of the two types of Medicare coverage policies. It
establishes whether Medicare will cover (or not
cover) specific services, procedures, or technologies
on a national basis. Medicare contractors are
required to follow NCDs. If an NCD does not
specifically exclude an indication or circumstance,
or if the item or service is not mentioned at all in
an NCD or in a Medicare manual, it is up to the
Medicare contractor to make the coverage decision.
Prior to an NCD taking effect, The Centers for
Medicare and Medicaid Services (CMS) must first
issue a manual instruction, program memorandum,
CMS ruling, or Federal Register Notice giving
specific directions to Medicares claims-processing
contractors. That issuance, which includes an
effective date, is the NCD. If appropriate, the
Agency must also change billing and claims
processing systems and issue related instructions
to allow for payment. The NCD will be published
in the Medicare Coverage Issues Manual. An
NCD becomes effective on the date listed in the
transmittal that announces the Coverage Issues
Manual revision. A searchable database of the
National Coverage Determinations can be found
at the following website: www.cms.hhs.gov/mcd/
search.asp In addition, the National Coverage
Determinations manual is available online at
www.cms.hhs.gov/Manuals/IOM/list.asp and
addresses all devices and procedures for which
coverage decisions have been made.
National Coverage Analyses
Numerous documents support the national
coverage analyses determination process. They
include tracking sheets to inform the public of
the issues under consideration and the status of
the review, information about and results of the
Medicare Coverage Advisory Committee (MCAC)
meetings, technology assessments, and the decision
memoranda that announce CMS's intention to issue
an NCD. These documents provide the rationale
behind the evidence-based NCDs. A list of recently
pending and closed NCAs can be found at the
following website: www.cms.hhs.gov/mcd/index_
list.asp?list_type=nca.
Local Coverage Determination
Local Coverage Determination is the second of
the two types of Medicare coverage policies. CMS
contracts with private insurance companies, known
as carriers, intermediaries, and program safeguard
contractors, to help process Medicare claims. These
Medicare contractors review and process claims
for services to make sure that payment is made
only for services that are covered under Medicare
Part A or Part B. If no specific NCD exists, local
contractors may make coverage decisions at their
own discretion.96
98
14.9. LINKS TO OTHER SOURCES OF

REIMBURSEMENT INFORMATION
Advanced Medical Technology Association*
www.advamed.org
American College of Cardiology (Payer Advocacy/
HIPAA) www.acc.org/advocacy/pmr/payer_
issues/payer_issues.htm
CMS: Medicare Learning Network*
www.cms.hhs.gov/MLNGenInfo/
D&MD Publications* Guide to U.S.
Reimbursement for Drugs, Medical Devices, and
Diagnostics
www.marketresearch.com/product/display.
asp?productid=1267741
E-Expert Reimbursement Partners
www.eexpertpartners.com/home.html
Elsevier Business Intelligence*
www.elsevierbi.com/index.html
Medical Device Manufacturers Association
www.medicaldevices.org/issues/Reimbursement
The Gray Sheet*
www.thegraysheet.com/FDC/Weekly/gray/
TOC.htm * This site may require a subscription or
registration to view some information
14.10. REIMBURSEMENT
SPECIALIST COMPANIES
In order for medical device manufacturers to
successfully introduce new medical technology in
the U.S., they should have an understanding of
three key elements (coding, coverage, and payment),
and how these elements relate to reimbursement. It
is also important that medical device manufacturers
develop long-term strategies for reimbursement
as well as implement, monitor, and analyze those
strategies.
Coding is a classification system used by insurers
and providers to identify diagnoses and describe
medical services and products. Codes also serve to
track utilization and establish reimbursement rates
for facility and professional services. Procedural
and diagnosis coding is based on the information
contained in the patients medical record and
cannot be coded based on reimbursement levels.
Coverage refers to the terms and conditions under
which a payer will or will not provide benefits for
a specific treatment. Coverage policies are usually
developed for new technologies or procedures.
Payment refers to the amount of reimbursement
provided to the hospital and the physician for
services related to the procedure.
manufacturers about payer trends and industry

requirements for specific medical technologies, and
can help develop reimbursement strategies.
AlvaMed, LLC, is a Boston-based medical
technology consulting firm whose consultants have
more than 20 years each of medical technology
experience and backgrounds ranging from business
strategy, device design, project management and
clinical care. AlvaMed consultants understand the
needs of offshore medical device companies, and
are skilled at identifying market needs, working
through reimbursement, regulatory, and clinical
issues, and understanding the rapidly changing U.S.
healthcare system. www.alvamed.com
B&D Consulting advises drug, device, and
biotech companies how to commercialize medical
technology and build reimbursed markets. The
Companys services cover a number of areas
spanning not only the technical requirements of
governments and other third-party payers, but also
the policy, political, and consumer forces that shape
those requirements. In the area of reimbursement,
B&D Consulting provides services for strategy
development, reimbursement support, and policy
advocacy and development.
www.bakerdconsulting.com/services/sectors/2ACC
E87CB2C148D88B97F340592F75C6.aspx
BioMedical Strategies (BMS) offers consulting
services in the area of reimbursement at every
stage of product development. This includes issues
such as whether new or existing medical codes are
appropriate, affect regulatory choices in product
claims and labeling, and (for devices) whether to
prepare 510(k) vs. PMA applications. BMS helps
its clients strategically evaluate coding, coverage,
and payment issues for their impact on physicians,
hospital administrators, and third-party payers.
In addition, BMS helps clients understand how
product design, clinical needs, regulatory decisions,
and marketing plans affect reimbursement levels
and timelines to profitability.
www.biomedicalstrategies.com
Boston Healthcare provides consulting services
in the area of reimbursement for pharmaceutical
products, diagnostics, and medical devices.
The Company has developed a Payer Panel of
key decision makers (pharmacy and medical)
in payer segments including private managed
care organizations (MCOs), preferred provider
organizations (PPOs) and indemnity insurers,
Pharmacy Benefit Management organizations
(PBMs), and technology assessment firms. Boston
Healthcare also has key contacts within Medicare
and Medicaid to assess and drive positive coverage.
www.bostonhealthcare.com/
The following companies can advise medical device

99
The JGS Group is a multifaceted reimbursement

consulting firm designed to assist clients throughout
the world with every aspect of their reimbursement
needs from product conception to post market
launch. Primary services include Reimbursement
Assessments (i.e. comparative market analysis,
information gathering; applying for new codes,
determining current codes appropriate for new
products, assisting clients with bringing new
products to the market, etc.), Reimbursement
Research, Patient Assistance Programs, Report
and Payer Trends, 24-hour Hotline, Development
of Billing Guides, Sales Force Training, National
Coverage Assistance, and Interviews for Clinical
Trials. www.jgsgroup.com
JR Associates provides specialized consulting
services in the reimbursement field. The company
helps medical practitioners, device manufacturers
and other healthcare organizations navigate
the complex dynamics of a rapidly changing
market. The Company combines first-hand
clinical experience and extensive knowledge of
regulatory requirements to help its clients operate
more productively and profitably. JR Associates
offers products and services in three primary areas:
(1) Reinforcement and refinement of product
positioning for emerging medical technologies; (2)
Coverage, coding and payment process analysis
and implementation for healthcare and life science
companies; and (3) Coding guides and schedules
that help practitioners simplify and manage billing
procedures. www.1jra.com
Princeton Reimbursement Group (PRG)
provides expertise on Medicare and third-party
payer reimbursement to the medical technology
industry. PRG services support a broad range of
companies, from small start-ups to Fortune 500
corporations. Services include reimbursement
assessment, payment analysis and modeling,
strategic planning, and healthcare policy analysis.
www.prgweb.com
Regulatory & Clinical Research Institue
(RCRI) provides a full range of regulatory
and clinical services as well as medical device
reimbursement analysis, reimbursement strategy
development, and reimbursement implementation
services. The Companys medical device
reimbursement services include: (1) Reimbursement

analysis and strategy development; (2) Coverage,
Coding, and Payment (CCP Assessments);
(3) Local coverage review and assessment; (4)
Medicare intermediary assistance; (5) Sales force
reimbursement training; (6) Development of
reimbursement support packets for your sales
team; (7) Reimbursement hotline for sales team
and customers; and (8) Publication strategy and
implementation. These services are also applicable
to In Vitro Diagnostics (IVDs), Biologics, and
combination products.
www.rcri-inc.com/index.php
Reimbursement Principles offers a fully
integrated line of reimbursement support services
including reimbursement assessments, clinical
trial reimbursement oversight and support, preauthorization services, hotline support services, and
reimbursement strategies, including short- and longrange strategic planning, correct coding initiatives,
coding applications, third party payer research and
educational campaigns, compliance with Medicare
regulations and sales force training. The Company
also offers a fully integrated HIPAA compliance
analysis and recommendations program.
www.reimbursementprinciples.com
Strategic Reimbursement Consulting offers
consulting services in two primary areas: Market
Assessment (1) to determine the appropriate payer
market (i.e. Medicare, commercial payers, workers
compensation, etc.) for device or procedure; (2)
to determine the optimal site of service (where
the procedure will be performed); (3) to research
reimbursement landscape for similar technologies;
and (4) to conduct payer market research to ensure
proper device positioning and payer acceptance.
Strategy Development in the areas of coding,
coverage, and pricing/payment. This includes
(1) identifying appropriate device and procedure
billing codes; (2) facilitating product and procedural
coding submissions if needed; (3) creating customer
support information identifying appropriate product
and procedure coding and billing, (4) maximizing
Medicare and third-party payer coverage; and (5)
identifying expected payment levels for device and
procedure at all applicable sites of service, and
devising a strategy to support device pricing.
www.strategic-reimbursement.com
15. Subcontracting Opportunities

Frank Ustar, Trade Commissioner, Swiss Business Hub USA and
15.1. INTRODUCTION
A variety of subcontracting opportunities
has emerged in the area of medical device
manufacturing by original equipment
manufacturers (OEMs) of all sizes across various
specialty fields including orthopedic devices,
cardiovascular devices, dental implants, single use

devices, medical electronics and instrumentation.
In many of these fields, a few large companies
dominate the market which makes them obvious
targets for subcontractors. While these majors
should not be ignored, a case can be made why
100
Swiss subcontractors should also focus on SMEs

operating in the various device fields. Some of
those reasons are as follows:
U.S. startup companies often provide even more
cutting edge technology than the majors;
The process of dealing with SMEs is often less
bureaucratic than that of the majors;
Identification of the appropriate contact persons is
usually easier in the case of SMEs;
Venture capital providers may offer assistance in
making contact with their portfolio companies;
Dealing with startup companies may provide a
back-door access to large OEMs since most startups
are ultimately acquired by the majors.
Entering into a business relationship with U.S.
device SMEs, similar to dealing with a major
manufacturer, requires:
An understanding of the customers business (i.e.
technology needs, phase of business development,
intellectual property protection processes, regulatory
issues);
A clear conception of the nature of the
relationship (i.e. transactional, preferred supplier,
strategic alliance);
Establishment of common objectives, mutual trust
building, and professional communication.
15.2. OUTSOURCING TRENDS
The trend toward outsourcing various areas of
medical device manufacturing has accelerated
considerably over past ten years. In some cases,
companies are even outsourcing research and
development. There are four major outsourcing
trends which are shaping the business environment
of medical device manufacturers:
The need to reduce costs as the result of
margin pressures arising from group purchasing
organizations and government payers including new
reimbursement programs such as the pay-per-use
concept;
The creation of an end-to-end supply chain which
requires device manufacturers to focus on their
core intellectual property and determine which
core processes are essential in the execution of the
business (i.e. product development and marketing as
opposed to manufacturing);
The proliferation of diagnostic and monitoring
devices and their increasingly widespread use
outside of medical facilities by millions of
consumers are necessitating a shift in the concept of
design and manufacturing that is more in line with
that of consumer electronics;

There is a growing need by device manufacturers
to increase both the number of products developed
and the rate of product development and
commercialization. These factors then put higher
pressure on research and development spending.
The above trends are prompting device
manufacturers to look for outsource partners who
have regulatory expertise, can assist with new
product introductions, have global reach, and
the ability to optimize the supply chain for the
competitive advantage of the device manufacturer.
15.3. CONSIDERATIONS BY OEMS IN
CHOOSING AN OUTSOURCE PARTNER
There are a number of factors that make
outsourcing an interesting option or a necessity
for OEMs. One obvious criterion for choosing
a subcontractor is cost reduction. The
subcontractor usually buys materials in larger
quantities and can pass the savings on to the
customer. In some cases, a cheaper manufacturing
location may generate cost savings provided
everything else is equal. However, since this is
rarely the case, locating a supply base in a low-cost
country may not always be beneficial.
Transforming fixed costs into variable costs
is another way in which device manufacturers try
to reduce overall cost. Transferring inventories
or disposing of machinery and equipment are
ways to reduce fixed costs. In some cases, contract
manufacturers are willing to take over such assets
and incorporate them into their own processes. For
these and other asset transformations to occur, the
nature of the relationship between the OEM and
the subcontractor must have reached an advanced
stage involving product management, R&D, and
finance.
Achieving operational efficiencies is another
important factor in the decision process of whether
or not to outsource. Subcontractors are often better
at managing and controlling material requirements
than OEMs. Also, the need for engineering talent
to execute complex operations is another task that
often exceeds the capabilities of many medical
device startups. As such, outsource partners are a
logical source for such talent.
Repair and remanufacturing are other services
that subcontractors perform more efficiently and
cost effectively than OEMs, and are often included
in a supply chain management contract.
Logistics support is a service that subcontractors
are often called upon to manage, especially in an
international context. When materials have to
be sourced from different parts of the world, an
understanding of international logistics traffic is critical
in order to achieve the lowest total landed cost.
101
It is important for subcontractors to be aware of

the OEMs level of understanding about the above
mentioned points, and determine the degree to
which a common strategy is possible that reduces
operating risk for the OEM. Subcontractors should
also be aware that venture financiers of startup
companies have their own philosophy regarding the
level of control that OEMs should maintain over
their various business assets, and they may base
their funding decisions on that philosophy.
One area of outsourcing that is controversial
is whether or not to outsource research and
development activities. In the past, R&D was
immune to outsourcing, but it is increasingly
being viewed as another way to free up resources
and speed up the entry of new products into the
pipeline. Some OEMs are by-passing the requestfor-proposal process and are sole-sourcing certain
research and development aspects. It is important
to point out that venture capital providers have not
always looked favorably on the outsourcing of R&D
activities and that view must be taken into account.
15.4. OUTSOURCING ARRANGEMENTS
Different outsourcing arrangements are possible
ranging from those that are purely transactionoriented to fully integrated strategic alliances.
Following are some of the possible relationships
with their associated benefits and risks.
Transactional
Such arrangements are usually for limited
assignments such as testing services.
Benefits: ease of entry and exit tight control
limited sharing of strategies
Risks: mostly governed by price considerations
relationship usually involves lower valued added
processes
Preferred supplier
This is often the result of an on-going relationship
which is evolving.
Benefits: involves a deeper understanding of
the OEMs needs and strategy results in a better
understanding of the contractors capabilities
allows for better predictability of the process
outcomes leads to stronger process alignment
Risks: longer time required to start a project
the contractor is less likely to provide dedicated staff
Partnership
Such a relationship is characterized by multiple
projects, shared planning and cross-functional teams.
Benefits: investments in collaborative processes
assignment of relationship management
direct investments shared understanding of needs
more predictable outcomes short learning curve
resulting in quick project starts
Risks: joint investments are tied to the specific
business opportunity less flexibility to change partner
Strategic alliance
This type of relationship involves shared
investments and mutual risk-reward.

Benefits: shared common goals joint strategic
planning relationship-based structure
agreements may be open ended
high level of mutual trust
Risks: requires significant resources to develop and
maintain relationship entry into and exit from the
relationship can be difficult and costly.
15.5. ACCESS TO U.S. CUSTOMERS
Increasingly, the Internet enables access to both
customers and the process of product planning
and development. On the other hand, gaining
initial entry by Internet is difficult, and most likely
a matter of chance. The Internet can enhance
but not replace the lead generation capabilities of
U.S.-based representatives who can meet face to
face with the right contact persons at the clients
manufacturing facilities. Usually, there are multiple
decision makers involved who need to be identified,
and their stage in the buying cycle also needs to
be determined, so that the right form and content
of communication with them can be initiated.
Here both the Swiss principal and the U.S.
representative(s) need to cooperate closely so that a
coherent message is delivered and the capabilities of
the Swiss subcontractor are presented in the most
effective manner.
It is important for the U.S. representative to have a
multi-prong approach for developing new business
leads, and an understanding of the various avenues.
Direct mail campaigns to qualified prospects as
well as advertising in specialty magazines are useful
in general, but need to be tailored to the stage of
the buying cycle of the prospective customer to
be effective. Monitoring industry news, industry
blogs and press releases from prospective clients
may provide some insight as to possible business
opportunities. Exhibiting at trade fairs such as the
Medical Design & Manufacturing Show West is also
a good source of leads. All of these avenues should
be part of the U.S representatives tool chest.
Contacts may be identified through:
- exhibiting at or visiting trade fairs or conferences
- purchase of mailing lists
- reviewing press releases,
- perusing social media such as
LinkedIn and Facebook
- reading industry blogs
- referrals
- patent searches
- financial reporting of publicly traded companies
15.6. FDA REGISTRATION OF
SUBCONTRACTORS
Establishments involved in the production and
distribution of medical devices intended for
marketing or leasing (commercial distribution) in
the U.S. are required to register with the FDA as
stated in Regulation 21 Code of Federal Regulation
807. Foreign establishments that manufacture,
prepare, propagate, compound, or process a device
102
that is imported, or offered for import, into the U.S.

are required to register their establishments on form
FDA 2891. This includes contract manufacturers
and contract sterilizers. Foreign establishments
must also list the devices that they export to the
U.S. on the listing form FDA 2892. All foreign
establishments must notify the FDA of the name,
address, phone and fax numbers, and email address
of their U.S. agent.
but are also compatible with the implant systems

of various other companies. Swiss precision
machining capabilities dovetail well with the
requirements for producing such instruments.
15.7. SUBCONTRACTING
OPPORTUNITIES IN ORTHOPEDIC
DEVICE MANUFACTURING
The orthopedics device market accounts for about
19 percent of the U.S. medical device industry
sales, and is projected to experience an annual
growth rate of about 4% over the next several
years 97. Orthopedic devices are used for the repair
and replacement of skeletal problems and include
products such as joint replacement, trauma products
used for repairing broken bones (splints, pins,
screws, plates, etc.), devices for spinal column repair,
and arthroscopic equipment for vision and camera
applications. As an industry, orthopedic OEMs
outsource more than half of their manufacturing to
suppliers.
The U.S. orthopedic device market can be divided

into two broad categories: (1) large bone trauma
devices and large joint devices; and (2) upper and
lower extremity devices. In the U.S. orthopedic
device market, many companies have focused
almost exclusively on the first category and over
the years this has resulted in considerable industry
consolidation. As a result, the large bone and large
joint category has become a highly concentrated
market which is dominated by seven leading OEM
companies. These companies include DePuy
(J&J), Zimmer, Stryker, Synthes, Biomet, Smith
& Nephew, and Wright Medical. In the second
category, the market for upper and lower extremities
devices is fragmented and remains unconsolidated
despite the fact that it is a significant part of the
overall orthopedic industry.
There should be ample opportunities for both

machine tool manufacturers who sell machine tools
to OEMs, subcontractors, and job shops; and Swiss
subcontractors who have the capability to machine
parts out of materials such as austenitic stainless
steels, cobalt-chromium alloys, and titanium
alloys. Subcontracting opportunities exist for the
production of tools and instruments that are used
to insert each of the various orthopedic implant
systems. Other subcontracting opportunities may
be available for the production of ceramic materials
for devices such as hip replacement systems;
devices using biostable polymers for use in various
procedures such as disc replacement and spinal
column repair; and resorbable materials used for
fixation devices such as pins, screws, nails, arrows,
plates, sheets, rivets, mesh, and suturing materials
and also bone growth products.
Orthopedic Instruments
There is a wide range of instruments used in the
numerous orthopedic implant procedures available
today. Each implant system usually has a special
set of instruments that is used in the surgical
procedure to insert a particular implant system.
The number and type of instruments included
in a set varies by implant system. For instance,
instrument sets for knee and hip implant procedures
may have more than 100 instruments, while revision
procedure sets may only have about 50 instruments.
Instrument systems can generally be categorized
as: (1) Implant-specific instruments which are used
exclusively for a specific brand of implant, such as
certain reamers, broaches, and high-precision knee
cutting blocks; or (2) Procedure-specific instruments
which are intended for a specific type of procedure,
such as a minimally invasive hip implant procedure,
15.8. U.S. MANUFACTURERS OF

ORTHOPEDIC DEVICES
Original Equipment Manufacturers (OEMs)
Although the seven leading companies comprise

about two-thirds of the U.S. orthopedic device
market, there are many small- and medium-size
companies that make up the remaining one-third.
A list of the major competitors in the orthopedic
device market can be found in section 6.2. There
are certainly many more companies, but a
comprehensive list would be too long for this report.
These and other OEMs of orthopedic devices may
have a need to outsource some of their production
or supply chain management requirements. Or,
they may have a need to purchase precision
machine tools so that they can manufacturer
products in-house themselves. In addition, many
orthopedic OEMs use third party contractors
in the U.S. to manufacture some or all of their
components and finished products. This being
the case, these third party U.S. contractors have a
need to purchase precision machine tools, and are
therefore excellent prospective customers for Swiss
suppliers.
15.9. IMPORTANT TRADE SHOWS
AND PUBLICATIONS FOR ORTHOPEDIC
DEVICE OEMS AND CONTRACT
MANUFACTURERS
Trade Shows
MD&M West
February 7-10, 2011
Anaheim Convention Center
Anaheim, CA
www.canontradeshows.com/expo/west10/
103
The MD&M West Show features the latest advances

in medical-grade materials, components, electronics,
computer-aided design and manufacturing,
production machinery, packaging, sterilization,
quality systems, device communications,
networking, enterprise IT and more. MD&M
West exhibitors are suppliers of the materials,
software, manufacturing machinery, components,
subassemblies, and contract services used to
design and produce medical devices. Exhibit
categories include: Materials; CNC Machine Tools;
Custom Automation Equipment; Metal & Plastic
Component Fabrication; Electronic Components/
Subassemblies; Testing Equipment/Services;
Adhesives; Motors/Motion Control; Extrusion
Services; Packaging Equipment/Materials; and
Contract Manufacturing Services. The exhibitors
are supplying products to the following segments:
cardiovascular, orthopedics, emergency and trauma
care, surgery, ophthalmology, personal/home care,
physical medicine and rehabilitation, diagnostics,
general hospital supplies and equipment and other
medical specialties. This show attracts over 3,000
exhibitors and 45,000 attendees. The Swiss Business
Hub USA organizes a Swiss pavilion for Swiss
companies that would like to participate at the show.
Medical Product Outsourcing
November 3-4, 2010
The Conference Center at Waltham Woods
Waltham, MA
www.mposymposium.com
Medical Product Outsourcing presents a highly
targeted, content driven symposium that introduces
the challenges of outsourcing to senior-level
executives in the medical device industry. This
high level event is designed to offer relevant
information on solving critical business issues
that foster interaction with OEMs and contract
manufacturers. From regulatory mandates to
market shifts to product development, MPO
Symposium offers in-depth and interactive sessions
geared toward the industry's specific needs. Topics
include: Operational Excellence; Outsourcing
Marketing Dynamics; Regulatory Affects from
Supplier to Consumer; and Evaluating Quality
through the Supply Chain. Attendees include
Medical Device Manufacturers, Contract
Manufacturers, and Suppliers to OEM and
Contract Manufacturing Companies. Functional
areas of attendees include Supply Chain
Management, Quality Assurance, Quality Control,
Strategic Sourcing, Purchasing/Procurement,
Regulatory Affairs, Supply Operations, General
Counsel/Legal Affairs, Global Supply Chain, IT/
IS Security, Materials Management, Packaging,
Channel Management, Emerging Technology,
Business Analysts/Consultants, Business Directors,
and IP/Patent Personnel.
Design & Manufacturing-New England

April 6-7, 2011
Boston Convention & Exhibition Center
Boston, MA
www.canontradeshows.com/expo/dmne10/
The Design & Manufacturing-New England show
covers the full spectrum of contract manufacturing
services, job shop services, automation technology,
packaging, rapid prototyping, assembly and
manufacturing equipment, electronics, computeraided design and manufacturing, testing and
inspection equipment and services, plastics and
much more. Exhibitors include suppliers with
years of experience in serving the aerospace/
aviation, automotive, electronics, industrial
equipment, medical, telecommunications, and
other high-tech industries. The show features a
Medical OEM Suppliers Pavilion. This pavilion
includes 150 of the nation's leading medical OEM
suppliers. Exhibitors present the full range of raw
material, software, manufacturing and automation
equipment, components, subassemblies, and
contract services used to develop and produce
medical devices. Attendees are R&D managers,
manufacturing and operations managers, design
and manufacturing engineers, project and product
managers, and senior executives. This show will be
combined with the BIOMEDevice and Electronics
New England shows in 2011.
OMTEC
June 15-16, 2011
Donald E. Stephens Convention Center
Chicago, IL
www.orthoworld.com/site/index.php/products/
omtec
OMTEC is a business oriented international
conference focused on optimizing supply chain
performance and profitability, minimizing product
development time, and maximizing speed to
market. As an industry, orthopedic OEMs
outsource more than half of their manufacturing
to suppliers. As a result, the orthopedic supplier
market has grown to about $1.5 billion. Key
decision makers from every leading orthopedic
company as well as emerging companies will be
present. The show attracts approximately 1,000
attendees and over 125 exhibitors.
Orthopedic Industry Publications
Orthopedic Design and Technology
(ODT) Magazine is specially geared toward
the manufacturing of orthopedic devices and
components. Coverage includes comprehensive
feature articles, industry news, trends and up-to-date
information on technological advances in this fastgrowing market segment. ODT has a circulation of
7,500. www.odtmag.com
104
The Journal of Bone and Joint Surgery focuses

on surgical techniques and new developments for
physicians, and includes a variety of technical
articles. JBJS is used more as a reference source
than any other orthopedic publication. www.jbjs.org
OPPORTUNITIES IN CARDIOVASCULAR
DEVICE MANUFACTURING
The cardiovascular device sector is one of the
leading growth areas of the medical device market.
One of the key drivers behind the high growth rate
of the cardiovascular device market is the stream
of innovative new devices including pacemakers
and implantable defibrillators, coronary angioplasty
catheters and stents, and prosthetic heart valves.
These devices have provided revolutionary
advances in the efficacy of treatment, and resulted
in strong demand by doctors and high margins for
manufacturers.
Recent product recalls indicate that quality
control in manufacturing is still not at the level
that is acceptable to the FDA, and this presents
opportunities for the quality-conscious Swiss
subcontracting community. In 2008, there were
19 recalls of products for cardiovascular disease
treatments, and in 2009 15 stent or catheter-related
products received an FDA recall.
Good opportunities for Swiss subcontractors exist
in the field of stent manufacturing where the
material, design, manufacturing, and quality control
aspects complement well with traditional Swiss
technological capabilities. Also, there is a growing
trend by original equipment manufacturers (OEMs)
to outsource many of the above mentioned areas as
a way to improve their financial position and gain a
competitive advantage.
Laser cutting and welding, guide wire tip attachment,
hermetic sealing, laser processing, precision stent
machining of stainless steel, nitinol, and chromium
cobalt are all examples of manufacturing processes
where Swiss companies excel.
Other areas of the cardiovascular device market
offer opportunities as well. Manufacturing needs
relating to various areas such as biocompatibility,
anti-microbial sterilization, device coatings, and
drug release mean that there will likely be an
increasing demand for contract manufacturers
with technical know-how in these areas. The
combination devices market has high potential for
growth, and it is in the best interests of OEMs and
contract manufacturers alike to ensure that fully
functioning partnerships are established which can
provide expertise in every aspect of these markets.
Often that requires close cooperation among
subcontractors in cases where one company cannot
offer all the required specialized services in-house.
OEMs prefer to have the subcontractor(s) manage
the various specialized manufacturing processes
rather than manage the supply chain themselves.
Primary OEM suppliers in the coronary

and peripheral vascular business are Abbott
Laboratories, Boston Scientific, Johnson &
Johnson, and Medtronic. Dominant players in the
endovascular market are Cook Medical and W. L.
Gore & Associates. Leading device manufacturers
in the structural heart disease segment are Edwards
LifeSciences, St. Jude Medical, Terumo Medical,
and Sorin Group.
15.11. IMPORTANT TRADE SHOWS AND
PUBLICATIONS FOR CARDIOVASCULAR
DEVICE OEMS AND CONTRACT
MANUFACTURERS
Trade Shows
MD&M Show West
February 7-10, 2011
Anaheim, CA
www.mdmwest.com
The MD&M Show West is the largest U.S.-based
exhibition for medical manufacturing. Five major
sections make up this event: (1) PrecisionTec
provides CNC metals processing solutions. Critical
tolerance solutions for orthopedic, surgical
instrument, and cardiovascular device markets are
featured; (2) Quality offers all tools OEMs need
to guarantee quality levels acceptable to regulators
and the market; (3) Medical Electronics showcases
electronic components, sub-Assemblies and contract
manufacturing services; (4) MedPak features the
leading suppliers of packaging materials, equipment
and contract services for medical manufacturing;
and (5) LaserTec showcases how lasers are being
used in precision welding, fine cutting, drilling, and
marking processes, and how companies incorporate
this technology in their manufacturing to increase
productivity, quality, and profits. This show attracts
over 3,000 exhibitors and 45,000 attendees. The
Swiss Business Hub USA organizes a Swiss pavilion
for Swiss companies that would like to participate at
the show.
MD&M East
June 7-9 2011
Jacob K. Javits Convention Center
New York, NY
www.canontradeshows.com/expo/east10/
Visitors include: Pharma Formulators, API,
Drug Intermediates, Excipients, Natural Extracts,
Contract Researchers, Custom Manufacturers,
Packaging Equipment / Materials, Quality
Assurance & Control, Product Development
Services, Laboratory & Processing Equipment
Manufacturers, Trade Publications, Contract
Research, Contract Processing are the target
visitors.
Exhibitors include: Medical Electronics, Testing
& Inspection, Plastics & Disposables, Packaging,
105
Labeling, Bar Coding, Cleanroom, Sterilization and

other related products.
Cardio Tec
September 15, 2010
Minneapolis, MN
www.cardiotec.com
This one-day medical product outsourcing event is
dedicated to cardiovascular device manufacturers.
The speakers will address manufacturing issues with
session topics that cover: today's lean manufacturing
environment; designing for manufacturability;
innovative testing and predictive modeling; pricing
pressures; and tactics to "fast track" a product's
release and commercialization.
Cardiovascular Industry Publications
Medical Product Outsourcing (MPO) is
dedicated to the growing trend of medical device
outsource manufacturing. In-depth coverage
includes comprehensive feature articles, industry
news, trends and other developments pertinent to
the contract manufacturer-OEM relationship.
www.mpo-mag.com
Medical Device & Diagnostic Industry
(MD+DI) is published by Canon Communications,
the organizer of the MD&M Show, and is targeted
to OEMs of medical devices.
www.canonmediakit.com/mddi
Injection Molding Magazine is targeted
primarily toward plastics manufacturers. www.
injectionmouldingmagazine-digital.com
QMED.com provides a medical device supplier
directory. www.qmed.com
15.12. OEM/SUBCONTRACTOR
COLLABORATION TRENDS IN
REPROCESSING SINGLE USE
DEVICES (SUDS)
During the 1990s, the effort by hospitals to
reduce costs created a new market niche for the
reprocessing of single-use devices (SUDs). Even
though manufacturers recommended that certain
devices be thrown away after one use, hospitals
found a way to recycle many SUDs by thoroughly
cleaning, inspecting, and reusing the devices for
multiple patients. Leading companies include
Ascent Healthcare Solutions, SterilMed Inc., Clear
Medical Inc. and MediSISS. In total, the FDA
reports there are 11 companies in the U.S. that
reprocess SUDs including one hospital98. From
this group, the two leading companies, Ascent
Healthcare Solutions and SterilMed account for
about 95% of all 3rd party reprocessing. As of
March 2009, SterilMed estimates that the use of
at least some reprocessed devices is a standard
practice in 70% of U.S. hospitals, and that more
than 3,000 hospitals currently have a reprocessing
program. OEMs have begun to collaborate with
subcontractors to reprocess their own SUDs. In
so doing, OEMs are able to focus on their core

competencies and the subcontractor is assigned the
task of managing and controlling the labor-intensive
reprocessing service.
By working with a subcontractor, OEMs are able to
provide the subcontractor with the original design
specifications so the device can truly be declared
good as new. This is a big advantage over thirdparty reprocessors who do not have access to the
OEMs original design specifications and must
reverse engineer the device in order to disassemble
it for cleaning, and then reassemble the device for
future use99.
Various additional facts also support the
conclusion that there are growth opportunities for
subcontractors who can reprocess SUDS for OEMs.
FDA data show there are 229 different types of
SUDs currently being reprocessed100. About $31.5
billion of single-use medical devices are sold
annually in U.S. hospitals and surgery centers, of
which around $150 million are recycled, according
to Ascent Healthcare Solutions. Ascent estimates
that about $3.6 billion of single-use devices are safe
for reprocessing. Many OEM device manufacturers
are affected by the reprocessing industry including
even the largest companies such as J&J, Boston
Scientific, Medtronic, and others. Since the
cost savings to hospitals and group purchasing
organizations has proven to be significant, and since
OEMs would like to control their own SUDs that
are reprocessed, the trend for OEMs to enter the
SUD reprocessing market is likely to continue. This
being the case, there should be good opportunities
for Swiss companies that can provide products
or services in the areas of ultrasonic cleaning for
cleaning the devices, and laser etching for marking
reprocessed products in order to keep track of the
number of times a device has been reprocessed.
In addition, subcontracting opportunities for the
following products/procedures exist in these other
segments of the market:
Endoscopy: Ridged and flexible endoscope
components and finished biopsy forceps devices.
Machining methods employed:
- laser welding of special metals and dissimilar
materials
- laser machining of exotic materials with minimal
deburring and post-processing steps
- conventional and wire EDMs for close tolerances
or as a secondary process to finish pre-machined
pieces
- metal finishing
Orthopedic: Screws and plates used in spine,
trauma, extremities, and maxiofacial applications.
Machining methods employed:
- multiple-axis contour machines for machining of
6-sided parts
106
- Swiss-type turning machines for complex bone

screws
- electropolishing of various metal types
- anodizing of titanium
Arthroscopy: Complete ligament repair devices,
anchor implants, and shaver hand pieces.
Maching methods used:
- similar to those used in orthopedic manufacturing
OPPORTUNITIES FOR DENTAL
INSTRUMENTS
The dental instruments market consists of two main
product areas: (1) the supplies segment, which
includes amalgams, drill bits, abutments, tooth
cement, and surgical kits; and (2) the equipment
segment, which includes furniture, drills, lighting
systems, and electronic hardware and software
products. About 10 major suppliers dominate the
dental implant market in the U.S. including the
Swiss companies Straumann and Nobel Biocare.
Most of the major companies do their own
manufacturing in-house, however, many smaller
manufacturers do not have the capability for rapid
prototyping of small-batch production runs, flexible
production, reprogramming of CNC machines,
and the personnel expertise for machine set up and
programming. This being the case, many of these
smaller companies outsource manufacturing.
The complexity of the implant screw designs, the
variety of attachments required, and the small
production runs make this a fertile field for Swiss
machining capabilities. Not only metal, but also
plastic abutments for temporary insertion such as
those offered by Zimmer Dental are often outsourced
for the same reasons. A list of the major dental
market participants can be found in section 10.2.
There could also be opportunities for Swiss tubing
molders because there is a wide variety of plastic
tubing used in dental offices. However, it must be
pointed out that many types of tubing are standard
and price-sensitive.
OPPORTUNITIES IN MEDICAL
ELECTRONICS
Implantable sensors are the most complex types,

followed by sensors in catheters, sensors used in
body cavities, sensors with external applications and
in contact with body fluids and skin. Implantable
sensors are Class III devices and require FDA
approval. One example would be Piezoelectric
sensors which have very low power requirements,
and are used especially in pacemakers. Due to
their complexity, they present good opportunities
for Swiss contractors that work with pacemaker
OEMs.
Connectors
Electronic connectors on medical equipment
must meet stringent requirements. They have to
guarantee signal reliability in the face of harsh
duty and tolerate frequent sterilizations. They
must also be small, lightweight, easy-to-use, and
highly reliable. Application areas include analyzers,
processing equipment, dental equipment, sensors
and catheters. In addition, some applications need
connectors made of nonmagnetic materials. Swiss
suppliers such as Fischer, Multi-Contact and Lemo
have been able to carve out significant niches in this
market segment.
Motors and Actuators
Piezoelectric motors and actuators have found
application in a variety of medical devices
including ultrasonic emitters, pumps, monitoring,
microdose dispensing, medical material handling,
micromonitoring, surgical devices, and radiology
equipment. Ultrasonic piezo motors and piezo
stepper motors are promising design types which
enable manufacturers to create smaller, lighter
and more precise devices. Swiss micro-motor
capabilities are well suited to provide advanced
solutions for this segment.
MEMS Oscillators
MEMS oscillators have found increasing popularity
in medical applications such as defibrillation and a
wide variety of monitoring devices. Swiss companies
such as MicroCrystal, a part of the Swatch group,
have been able to take advantage of their expertise in
penetrating the medical device market.
Sensors
Sensors have found widespread applications in the
medical device field, and offer good outsourcing
opportunities for Swiss companies. Sensors are used
in equipment for surgical procedures, intensive care
units, hospital recuperative care, and home care.
107
16. Importing Into the

United States
Paul S. Anderson, Partner, Sonnenberg & Anderson
16.1. OVERVIEW
The importation into the U.S. of medical devices,
and goods and products generally, is regulated
by the U.S. Department of Homeland Security
(DHS), Bureau of Customs and Border Protection
(Customs or CBP). The purpose of this
chapter is to generally describe the structure of
CBP and its operations, and to set forth a brief
synopsis designed to provide a basic knowledge
of general importing requirements, while also
discussing certain issues of concern for importers
of medical devices. Many issues may arise which
require fine technical distinctions or fall within gray
areas of the law. An importer should invest time to
obtain expert advice prior to the importation of any
product in order to minimize potential problems.
Informed Compliance and Reasonable Care
The Customs Modernization and Informed
Compliance Act set forth the concept of informed
compliance whereby Customs and the importing
community share the responsibility of administering
the U.S. Customs laws. This informed
compliance concept places an affirmative burden
on importers to exercise reasonable care in the
discharge of their responsibilities relating to the
importation of merchandise. An importer must
exercise reasonable care in all facets of the importing
process, including the manner in which it describes,
classifies and values imported merchandise.
Reasonable care means that an importer will
act reasonably, and with knowledge of the facts
and its legal obligations. The concepts of informed
compliance and reasonable care permeate all
aspects of Customs administration and enforcement.
16.2. U.S. CUSTOMS AND BORDER
PROTECTION (CBP)
Customs basic structure involves CBP
Headquarters in Washington, DC; the National
Commodity Specialist Division (NCSD) in New
York; and the numerous local ports throughout
the country where the merchandise actually is
presented to Customs for clearance. Customs
Headquarters sets policy, has oversight of security
and compliance procedures, and issues rulings and
decisions through the Office of Regulations and
Rulings (OR&R). Port Directors are in charge of
the local ports, and it is at the local ports where
the day-to-day importing activity occurs. The
NCSD in New York provides supervisory guidance
with respect to tariff classification decisions at the
outlying local ports so as to ensure consistency and
uniform treatment at all ports.
CBP has several levels of personnel with which an

importer should be familiar. The most frequent
point of contact will be the import specialists of the
local ports who are Customs officials responsible
for monitoring merchandise imported into the U.S.
Import specialists request information so that they
can properly examine the tariff classification and
value of the imported merchandise. In addition,
import specialists make determinations on country
of origin marking issues, check documents for
accuracy and completeness, and perform many
other similar day-to-day tasks.
Oral advice from an import specialist is not binding
on Customs and generally can be changed at any
time. Importers may obtain a binding ruling from
Customs by submitting a request in writing, along
with a sample of the merchandise, to Customs
Headquarters or to the National Commodity
Specialist Division. Greater detail concerning the
ruling process is set forth later in this chapter.
Inspectors are Customs personnel who actually
examine the merchandise prior to release into
the Customs territory of the U.S. Importers
typically do not have much contact with inspectors
unless a problem arises with the clearance of the
merchandise. Even then, the problem more than
likely would be brought to the importers attention
by the import specialist. An inspector ensures
that merchandise presented for entry matches the
articles described in the commercial invoices, checks
for country of origin markings, and otherwise
examines the merchandise to ensure that it is in
compliance. It should be noted that only a small
percentage of all merchandise imported into the
U.S. is physically examined by an inspector.
Special Agents are under the jurisdiction of a
separate bureau of DHS, U.S. Immigration and
Customs Enforcement (ICE). Special agents are
not involved in routine Customs matters. Rather,
special agents work on suspected Customs law
violations and related issues. Therefore, a telephone
call or visit from a special agent is a serious matter
and an importer should immediately contact
Customs counsel if such an event occurs.
Current Regulatory Environment
Compliance with the Customs laws is of primary
importance in todays environment where
security considerations are paramount. CBP has
promulgated many new programs designed to
make compliance more efficient, yet also meet
heightened security considerations. CBP enforces
108
the regulations of numerous governmental agencies

and acts as the primary enforcement arm for
the application of such regulations to imported
products. These considerations are discussed in
greater detail in Section 16.6
16.3. THE ENTRY PROCESS
Entry Documentation
Importers typically utilize licensed Customhouse
brokers to assist in the entry of merchandise into
the U.S. A Customhouse broker is licensed by
CBP and files the appropriate documentation with
Customs to obtain release of the merchandise and
to effect payment of duties. A Customhouse broker
is distinguished from a freight forwarder in that a
freight forwarder performs the service of arranging
for the transportation of merchandise from point A
to point B, but is not licensed to transact Customs
business with CBP or file entry documentation.
Many companies are both Customhouse brokers
and freight forwarders. It is possible for an
importer to file its own entry documentation,
however, it is generally recommended that a
Customhouse broker be utilized.
Invoicing
Invoices presented to Customs must be properly
prepared and meet regulatory requirements. The
commercial invoice should show the port of entry to
which the merchandise is destined; the name of the
party to which the merchandise is sold and the place
from where it was shipped; a detailed description
of the merchandise, in English, including the name
by which each item is known; the grade or quality,
marks, numbers and symbols under which they are
sold by the seller; the quantity of merchandise; the
purchase price of each item; the currency in which
the transaction is made; and all charges itemized
by name and amount including freight, insurance,
commissions, coverings, costs of packing, and
related expenses.
Rulings by Customs and
Administrative Appeal
The entry process begins with the Customhouse

broker submitting a CBP Form 3461 to Customs
which indicates the basic information concerning
the merchandise including the shipper, importer,
type of merchandise, tariff classification, value and
related information. The information is submitted
electronically through the ABI (Automated Broker
Interface) system. CBP will then issue a release
of the merchandise or indicate that there is a
problem and that additional information is needed.
CBP Form 7501 will then be filed by the broker
which is known as the Entry Summary and
which summarizes all information concerning the
calculation of duties, asserted tariff classification
items, date of entry, country of origin, and related
information. An entry summary and payment of
duties must be filed within 10 business days from the
date of entry.
An importer may obtain protection and assurance

that its tariff classification, method of valuation, or
country of origin marking methodology is correct
by obtaining a binding ruling from Customs.
Binding rulings are prospective in nature and
provide a written decision from Customs as to
any of those issues noted above. A ruling may be
obtained from the National Commodity Specialist
Division in New York and these rulings frequently
may be secured within 30 days. Rulings from
the NCSD in New York are usually limited to
simple classification issues or certain country of
origin marking issues. For other issues including
valuation, more complex classification issues, and
more difficult country of origin determinations, a
ruling may be obtained from CBP Headquarters
in Washington, D.C. These rulings take longer
to process and can be secured within 120 days,
but often take longer. In each case, a ruling will
give predictability to an importer as to dutiable
consequences of its transactions. A ruling may
be revoked or modified, but such an occurrence is
relatively infrequent and generally would not apply
on a retroactive basis.
It is also possible to utilize a Customs Bonded

Warehouse or Foreign Trade Zone (FTZ) regarding
entry of merchandise. Merchandise may be
brought into a Customs Bonded Warehouse upon
the filing of an appropriate warehouse entry.
Duties on the merchandise will not be deposited
with Customs until the product is withdrawn
from warehouse for consumption into the U.S.
Merchandise may be inspected, repacked, stored,
and similar treatment, but may not be processed
or manufactured in a bonded warehouse and then
brought into the U.S. In the case of processing
or manufacturing, the product must be exported.
Merchandise can also be brought into a Foreign
Trade Zone, and again, duties are not paid until
merchandise is withdrawn for entry into the U.S.
A Foreign Trade Zone requires special permission
but allows for greater flexibility and freedom of
manufacture, production or manipulation.
It is also possible to obtain decisions from Customs

on matters contested administratively which are
not prospective in nature. The methods available
generally depend upon whether or not an entry has
been liquidated. An importer should note that
money paid to Customs at the time of shipment
clearance is only a deposit of estimated duties.
The final accounting for Customs duties occurs at
liquidation of an entry which may occur months
or even years after goods are released by Customs.
The normal liquidation cycle is 314 days from
the date of entry, i.e., an entry will be liquidated
within 314 days from the entry date. An importer
has a right to contest a determination by Customs
regarding an entry and to receive a refund of any
excess Customs duties paid if that challenge is
successful. In order to do so, the importer must
file a protest with Customs within 180 days from
the date of liquidation of the entry. A protest
109
contesting a decision by Customs is filed at the

local port where entry was made and generally the
decision is also made there. In some cases, further
review of the protest by Customs Headquarters may
be requested. The decision by Headquarters in
such a case, referred to as an AFR (Application for
Further Review), will also act as a binding decision
as to the issue. It is also possible to request a ruling
from Headquarters in cases where entry has been
made but the entry has not yet been liquidated.
In such an instance the appropriate mechanism is
referred to as a Request for Internal Advice.
16.4. CLASSIFICATION AND VALUATION
OF IMPORTED PRODUCTS
Customs duties are generally assessed on an ad
valorem basis, meaning that the amount of duties
owed will depend upon the duty rate applied and
the value placed upon the imported merchandise
by CBP. The duty rate to be applied to imported
merchandise is determined by its tariff classification
and country of origin. Customs duties may also be
specific, i.e., 10 each, or may be a compound rate
of ad valorem and specific duties.
Tariff Classification and Duty Rates
There are over 12,000 separate subheadings in
the Harmonized Tariff Schedule of the U.S.
(HTSUS) under which imported merchandise may
be classified. In order to determine the proper
classification of imported merchandise within
the HTSUS, an importer must be familiar with
the General Rules of Interpretation (GRI) of the
HTSUS. In many instances, an article may seem
to fit exactly within a tariff provision and yet not
be ultimately classified under that tariff provision.
The GRIs are to be consulted in all cases and
are applied in sequential order. Factors affecting
tariff classification include whether the product is
specifically defined in the Section or Chapter Notes;
whether the item is provided for specifically in a
particular tariff item; whether a particular tariff
item is more specific than another; the common
meaning of a tariff item; the principal use of an
item; and the component make-up of the item.
Principal use is frequently a critical issue as regards
tariff classification of medical devices. A recent
CBP ruling of interest involved blood filtration
assemblies which included a filter, connector, drip
chamber, clamps and related components. Customs
held that the article was used as a medical device
when performing a blood administration function,
but the principal function of the product was as
filtering apparatus, and therefore not classifiable as
a medical device. Another recent ruling involved
medical-grade screw blanks and finished screws
which were made of a specialty stainless steel and
used with orthopedic devices. The ruling noted that
the FDA treated these screws as medical devices for
purposes of that statute, but held that the importer
could not show that these were parts of orthopedic
appliances and that the regulations of an agency
other than Customs are not binding on CBP.
Conversely, U-Clips used solely during vascular

and cardiac surgery to join vessels and organs were
held to be principally used in the surgical sciences,
and therefore classifiable under the medical
instruments and appliances heading. Classification
as a medical device is frequently either free of duty
or a lesser duty rate than the competing, nonmedical tariff provisions.
There are also many special programs allowing
for reduced duties or importation free of duty.
Many of the programs involve imports from
developing countries, e.g., the Generalized System
of Preferences (GSP). Of course Switzerland
does not qualify as a developing country, but Swiss
companies may produce goods in developing
countries and ship them directly to the U.S. which
may qualify for duty-free treatment under such a
program. There are also many bilateral agreements
providing for duty-free treatment such as the U.S.
Israel Free Trade Agreement, U.S. Chile Free
Trade Agreement, and others. There is also the
North American Free Trade Agreement (NAFTA)
which involves duty-free treatment for qualifying
articles between Mexico, U.S. and Canada. Again,
Switzerland is not a party to any of these free
trade agreements, but it is possible to manufacture
products within these countries and qualify for dutyfree treatment upon importation into the U.S. if the
technical requirements are met.
Customs Valuation
of Imported Merchandise
Method of Customs Valuation
Customs valuation can be a very complicated area,
and one which can have a major effect on Customs
duties. A common mistake made by importers is
believing that imported merchandise always will
be valued (appraised) at the transaction price,
or the price actually paid for the merchandise
by the importer. This is referred to as the
transaction value method of appraisement. Most
appraisements are made based upon transaction
values. However, Customs may use other methods
of appraising imported merchandise such as
deductive value or computed value. These methods
may require the importer to provide costs, expenses
and detailed accounting information in order to
satisfy Customs as to the correct appraised value of
the imported merchandise. Special rules also apply
where merchandise is brought into the U.S. on a
consignment basis and is not sold to a purchaser
in the U.S. until a later time. Alternative methods
of appraisement generally apply in related party
transactions.
An importer is free to structure a transaction in
such a way as to take advantage of the Customs
laws. Some importers employ buying agents
whose commissions are non-dutiable items. Other
favorable structures involve the utilization of the
first sale rule which involves sales through a
middleman, who in turn sells to a U.S. importer,
110
yet Customs appraisement is made at the first

sale (price to the middleman) level. Certain legal
requirements must be met in order to utilize
these methods of appraisement and they are not
automatically available. Finally, it should be noted
that although most appraisements are made based
upon the invoice price to the importer, amounts for
freight and insurance are non-dutiable items and
should be broken out separately if included in the
invoice price to ensure that they are not included in
dutiable value.
Technology, Royalties and License Fees
License or royalty fees that are paid by the buyer to
the seller of the imported merchandise may or may
not be dutiable depending upon certain factors.
Since medical devices frequently involve know-how;
patents; licensed technology covering processes to
manufacture; trademarks; rights to sell and similar
issues; royalty or license fees may be treated as
dutiable items.
The Customs regulations at 19 CFR 152.103(f)
provide that:
Royalties or license fees for patents covering
processes to manufacture the imported merchandise
generally will be dutiable. Royalties or license fees
paid to third parties for use, in the United States, of
copyrights and trademarks related to the imported
merchandise generally will be considered selling
expenses of the buyer, and not dutiable. The
dutiable status of royalties or license fees paid by
the buyer will be determined in each case and will
depend on 1) whether the buyer was required to pay
them as a condition of sale of the merchandise for
exportation to the United States, and 2) to whom
and under what circumstances they were paid.
Royalty fees paid by the importer to the seller for
merchandise manufactured under patent, and
where the merchandise could not be imported
in the absence of paying such royalties, will be
considered to be dutiable. Payments made by the
importer to a third party for the right to distribute
or resell the imported merchandise will generally
not be added to dutiable value and not considered
a dutiable item. Where a foreign producer sells
merchandise to an unrelated U.S. importer and the
importer pays a royalty to an unrelated third party
for the right to manufacture and sell a product
made in part from the imported merchandise, and
where the royalty is based on the selling price of the
further manufactured product in the United States,
such license fee would not be considered dutiable.
The rationale for such treatment is that the license
fee is not a condition of the sale of the imported
merchandise for export to the U.S.
The issue of dutiability of royalties and license fees
can appear to be somewhat inconsistent and may
depend upon fine distinctions in the underlying
facts. Importers and exporters to the United States
are well-advised to fully research these issues before
shipping merchandise and/or technology to the

U.S., and before settling on the purchase price.
16.5. COUNTRY OF ORIGIN MARKING
All merchandise of foreign origin imported into the
U.S. must be marked with the country of origin.
The Customs marking requirements in Section 304
of the Tariff Act of 1930 are as follows:
Every article of foreign origin (or its container)
imported into the U.S. shall be marked in a
conspicuous place as legibly, indelibly, and
permanently as the nature of the article (or
container) will permit in such a manner as to
indicate to an ultimate purchaser in the U.S. the
English name of the country of origin of the article.
There are many exceptions to the above rule, so an
answer to any country of origin marking question
must take into account the particular product
involved and the manner in which the good is
imported and used. In general, goods imported
into the U.S. must be marked in a conspicuous
manner with the English name of the country of
origin. In order for the marking to be considered
conspicuous, it must be legible, easily found, and
read without difficulty. Goods must be marked in
such a manner as to indicate the country of origin
to the ultimate purchaser in the U.S. The ultimate
purchaser is generally the last person in the U.S.
who will receive the article in the form in which it
is imported. Failure to properly mark an imported
article to indicate its country of origin can result in
a special 10% ad valorem marking duty, demands
for redelivery of the merchandise to Customs,
and accompanying liquidated damages, or other
penalties.
16.6. PENALTIES
AND COMPLIANCE ISSUES
Penalties and compliance issues are separate
considerations, but are closely connected in practice.
Under the U.S. Customs laws it is unlawful to enter,
introduce, or attempt to introduce merchandise
into the U.S. by means of material false statements
or omissions, whether by fraud, gross negligence or
negligence. Customs enforces numerous penalty
statutes, but the most frequent is 19 USC 1592.
The amount of any penalty imposed will depend
upon the level of culpability and can be quite
severe. If Customs determines that an importer
fraudulently evaded duties it may assess a penalty
in the amount of the U.S. domestic value of the
merchandise. If a determination is made that
the importer violated Customs laws due to gross
negligence, a penalty of up to four times the loss of
Customs duties may be assessed and, for instances
of ordinary negligence, a penalty up to two times
the loss of revenue may be assessed.
111
In addition, the amount of the loss of revenue to

the government must be paid. It is possible for an
importer to avoid the imposition of harsh penalties
by filing a prior disclosure with Customs. A prior
disclosure is a detailed explanation of the facts
constituting a potential violation of 19 USC 1592,
as well as calculating and tendering the amount
of duties that were lost as a result of the potential
violation. In order to meet regulatory requirements,
a prior disclosure must be filed by the importer
prior to any actual knowledge that an investigation
has been commenced by Customs. Acceptance
of a prior disclosure by Customs dramatically
reduces the potential liability to a claim for interest
only in the case of gross negligence and ordinary
negligence, and one times the revenue loss in cases
of fraud.
Customs also enforces the statutes and regulations
of numerous other governmental agencies that
apply to the imported merchandise. In the case
of medical devices, it is most likely that FDA
regulations will be enforced by Customs. Failure
to properly observe FDA requirements may result
in detention, seizure of the merchandise, and/
or penalties up to three times the value of the
shipment.
In addition to penalties, various security measures
and related compliance programs have been
implemented at a rapid rate subsequent to
September 11, 2001. Some of these security
measures apply to products generally, and are
designed to tighten security in all aspects along
the supply chain. Among these are the Container
Security Initiative (CSI) and the Secure Freight
Initiative (SFI). There are also other programs
involving supply chain security and identification
of all parties in that supply chain. Two of the most
common security related initiatives in place that
have applicability to importers are the Customs
Trade Partnership Against Terrorism (C-TPAT)
initiative and the Importer Security Filing (ISF)
program.
basis and either approves the current structure or

offers suggestions for improvement. Customs will
also, at some point, perform a validation which is
essentially an onsite audit of the system.
A more recent program also of significant interest
to importers is the Importer Security Filing (ISF).
This program is not optional and requires both
importers and carriers to submit certain additional
information concerning the imported merchandise
to Customs before the cargo has been brought into
the United States by vessel. A separate filing must
be done under this program prior to the arrival
of the merchandise, and numerous informational
elements must be presented including the importer
of record number; consignee number; the ship
to party; the manufacturer or suppliers name and
address; the country of origin; tariff classification;
the container stuffing location; and name of the
consolidator. Customs brokers are conversant with
this program generally, and assist importers with
these filings.
New initiatives are constantly proposed by Customs
regarding security and compliance, and Congress is
continually examining security issues by proposing
and considering related new legislation. Since these
programs develop quickly, it is imperative that any
company selling to the United States be familiar
with these programs so as to avoid any mis-steps or
problems.
The C-TPAT program is a major initiative by

Customs which attempts to strengthen security
considerations regarding importers, Customs
brokers, freight forwarders, ocean transportation
intermediaries, and modes of transportation
in the supply chain. The program is voluntary
and an importer may elect to participate in the
program, or not. The C-TPAT program consists
of an assessment by the importer and Customs of
the importers global supply chain. In return for
the importers participation and demonstration
that it meets or exceeds certain minimum security
requirements, Customs offers incentives to the
importer such as reduced cargo inspections, an
assigned account manager, access to the C-TPAT
membership list and eligibility for account based
processing with Customs, and possible participation
in programs such as the Importer Self Audit (ISA).
Customs assesses each importer on a case-by-case
112
17. FDA:
Bringing a Medical Device to
Market: Premarket Review
John Lemker, The Wood Burditt Group
The Federal Food, Drug and Cosmetic Act (the
Act)101 establishes comprehensive requirements
for the regulation of medical devices which are
intended for human use. The current regulatory
scheme was added to the Act by the Medical Device
Amendments of 1976102.
Class II products with higher risk than Class I,

usually, but not exclusively non-invasive, and do not
support or sustain human life;
The amendments were made in response to a rapidly

growing medical device industry, the introduction
of significantly more complex medical devices and
some highly publicized problems with injuries related
to medical devices. Although the Act has been
amended since 1976103 to address specific issues and
regulatory needs, the basic scheme for premarket
review is substantially the same.
The premarket pathways107 consist of a premarket

approval application108 (PMA) and a premarket
notification109 , referred to by the section number
of the Code of Federal Regulations describing the
process: 510(k). Products that fall into Classes
I and II go through the relatively shorter 510(k)
process. Class III products undergo much more
detailed analyses as part of PMA review process.
The agency responsible for the administration

of the Act and for enforcing its provisions is the
Food and Drug Administration (FDA). It issues
regulations, policies and guidances implementing
the provisions of the Act.
The PMA process will be described for purposes

of comparison and completeness but not in
detail. This review of the 510(k) process includes
a discussion of the significant aspects of the
procedure, initial determinations which need to be
made and some of the changes to the process being
discussed.
If necessary, the FDA can compel compliance

through administrative, civil and criminal
enforcement authorities. These can be brought
administratively within the agency or through court
proceedings104.
With respect to imported products, it has the
authority to detain them and refuse their admission
into the United States. This is an important
regulatory tool which can be used to address issues
with imported products105.
The Act and FDA regulations impose a variety
of requirements upon the manufacturing and
distribution of medical devices. This extends from
device design, testing, manufacturing procedures and
controls, and labeling through distribution106 and use.
The focus of this discussion is the Acts premarket
review requirements.
17.1. INTRODUCTION
In the U.S. medical products are grouped into three
classes based upon the oversight needed to ensure
product safety and efficacy:
Class I products that have low risk of illness or
injury, and do not support or sustain human life;
Class III products that are life-supporting, lifesustaining or carry a high risk of illness or injury.
17.2. PMA 510(K) DISTINCTION

The differences between the 510(k) procedure
and the PMA process stems from the statutory
standard which must be met for authorization and
the statutory requirements for an application or
notification. These impact the nature and quantity
of evidence which must be included to support a
submission.
Devices subject to the 510(k) notification process
must be shown to be substantially equivalent to a
legally marketed device. A device for which a PMA
is required must be demonstrated by information in
the PMA to be safe and effective, i.e., there must be
a reasonable assurance of safety and effectiveness.
The applicable statutory standard establishes the
nature of the review.
The 510(k) review does not result in regulatory
approval but provides a classification and
authorization to market. A PMA does culminate
with an approval for that device.
There are two important factors relevant in
determining what, if any, premarket review is
required. The first is identifying a products status as
a medical device and then its classification.
113
17.3. PRODUCT STATUS

When planning to introduce a medical product into
the United States market one must first determine
how it will be regulated, i.e., as a drug, medical
device or biologic.
In most instances, the status of a product is easily
determined. For products which are difficult to
classify, the Act provides a procedure to obtain a
regulatory opinion110 . Any person who submits an
application or submission for a product under the
Act may submit a request to the FDA concerning
the categorization of the product, i.e., drug, medical
device, biological or combination product, or
concerning the component of the FDA, such as
The Center for Devices and Radiological Health
(CDRH), which will have primary authority over
the product.
The FDA must respond within 60 days to the
request with a classification of the product (drug,
device, or biologic) or identifying the center which
will regulate the product.
Another potential concern is with the regulation of
a combination product. A combination product
is one which consists of two or more FDA regulated
components, e.g., drug and medical device,
biological and medical device. The Act establishes
a procedure for determining which agency
component will have primary jurisdiction over a
combination product111.
The FDA has established regulations and guidances
governing the assignment of a combination product
to a specific agency center112. The rules need to
be reviewed if a combination product is to be
submitted.
To place the regulatory scheme being discussed in
context, one must begin with the Acts definition of
a medical device.
The term is defined, in relevant part, as follows:
The term device means an instrument, apparatus,
implement, machine, contrivance, implant, in vitro
reagent, or other similar or related article, including
any component, part or accessory, which is:
1) recognized in the official national formulary, or in
the US Pharmacopeia, or any supplement to them,
2) intended for use in the diagnosis of disease
or other conditions, or in the cure, mitigation,
treatment, or prevention of disease, in man or other
animals, or
3) intended to affect the structure or any function
of the body of man or other animals, and which
does not achieve its primary intended purposes
through chemical action within or on the body of
man or other animals and which is not dependent
upon being metabolized for the achievement of its
primary intended purposes113 .
Once one has determined that a product is a

device, the next step is to identify its regulatory
classification.
17.4. MEDICAL DEVICE CLASSIFICATION
Identifying the class into which a device belongs is
critical. The classification determines the regulatory
controls applicable to the device, what premarket
review procedures apply or whether the device is
exempt from premarket review.
The FDA has completed the classification of many
categories of devices114. Each type of device is
placed into one of three classes. The classification is
based upon the level of control deemed necessary to
assure the safety and effectiveness of the device115.
The classes are:
Class I General Controls:
General controls refer to the provisions of the
Act and implementing regulations applicable
to all medical devices. For example, this
includes requirements prohibiting adulteration
and misbranding, those applicable to product
manufacturing, establishment registration and
product listing, as well as a number of others.
Class II General and special controls:
Devices placed in Class II are deemed to pose a
higher risk than those in Class I and may be subject
to special controls as well as general controls.
Special controls include performance standards,
guidances and post-market surveillance among a
number of other regulatory options.
Class III General Controls
and Premarket Approval:
Class III devices are those which have been judged
to present the most significant risks and require
premarket approval in addition to the other
regulatory requirements of general application.
****
A devices classification is important in determining
how it will be regulated including whether
premarket review is required and, if so, which
review, PMA or 510(k), is imposed. A number of
device categories are exempt from premarket review.
These are identified in the relevant classification
regulations116.
There are limitations on exemptions which
can result in the exemption not applying and
premarket review required. For example, if a new
intended use was claimed for an exempt device, the
exemption from premarket review would not be
available. There are many Class I devices exempt
from premarket review.
114
The class into which a device is placed is set forth

in the classification regulations. These are generic
classifications and one must compare the device
carefully with the regulation to ensure it applies. If
the device varies in any significant manner from the
generic category it will automatically be placed in
Class III and require a PMA unless reclassified.
The predicate device is a device which was

legally marketed prior to May 28, 1976, which is
referred to as preamendments device, for which
a PMA is not required, or it is a device which has
been classified in Class I or II, or a device which
has previously been authorized through a 510(k)
submission.
Devices which were not in distribution prior to May

28, 1976 are referred to as postamendment devices.
These devices are classified automatically by statute
117
in Class III.
A device may not be marketed until the FDA has

issued an order to the person making the submission
recognizing that the device is substantially
equivalent to the predicate device. This is not an
approval but a clearance which permits the device
to be marketed.
They require premarket approval unless:

1) FDA reclassified the device into Class I or II; or
The term substantially equivalent is defined in the

Act122. In substance it means that the device which
is the subject of the 510(k):
2) FDA issues an order classifying the device into

Class I or Class II in accordance with Section 513
(f) (2) of The Act; or
1) Has the same intended use as the predicate, and
3) FDA issues an order finding the device

2) possesses the same technological characteristics as
substantially equivalent to a device already on the
the predicate; or
market under a 510(k) notification.
3) has different technological characteristics
There are procedures which one can pursue to seek
but does not raise new questions of safety and
reclassification of a device which has been placed
effectiveness and is demonstrated to be at least as
into Class III and, thereby, eliminating the need for
safe and effective as the predicate.
a PMA118 .
Content and Format
If one is successful in having a device placed
into Class II, a 510(k) submission will probably
As previously stated, the FDA has promulgated
need to be made and a substantially equivalent
regulations describing the content and format of a
determination from FDA received prior to
510(k) submission . It also has guidances covering
marketing the product.
the 510(k) submission generally and some device
specific guidances which may be special controls
17.5. PREMARKET NOTIFICATION
for the device. These are very useful in preparing a
PROCESS 510(K)
submission123.
Prior to marketing a device for which a PMA is
not required, a 510(k) submission must be made to
The FDA has established what it calls the new
the FDA by the person responsible for the device
510(k) paradigm. This created three types
unless the device is exempted by regulation119. If
of 510(k) submission options designated as the
an exemption is being relied upon, one must be
traditional 510(k), the special 510(k), and the
certain that the device qualifies for the exemption or abbreviated 510(k).
significant regulatory problems could arise.
A 510(k) is required when a person introduces a
The special and abbreviated are optional
device into commercial distribution for the first
formats for qualifying submissions.
time, or when a change is made in the intended
use of a legally marketed device, or when there is a
1) Traditional 510(k)
change or modification in a marketed device which
The traditional 510(k) may be used for any
has a significant effect on the safety or efficacy of
submission, i.e., for an original or for a significant
the device120.
change in a cleared device. This is the submission
established in the regulations which is the most
A 510(k) is intended to demonstrate that the device
comprehensive in content.
for which the submission is made is substantially
equivalent to a legally marketed device. The
2) Special 510(k)
requirements for the format and content of a 510(k) A special 510(k) may be used for certain
submission are located in the FDAs regulations121
modifications to a device previously cleared through
and related guidance documents.
the 510(k) procedure. The change must not affect
the intended use of the device or alter its basic
Essentially, the purpose of a 510(k) submission is to
scientific technology. Information resulting from the
demonstrate that the device is as safe and effective
design control process can be used as the substantive
as the legally marketed device which is commonly
information for the review and clearance of the
referred to as the predicate device.
device.
115
3) Abbreviated 510(k)
Recent Developments
An abbreviated 510(k) may be submitted if

a guidance document exists for the device, a
special control has been established, or FDA has
recognized an applicable consensus standard. The
regulations are followed for format124, but one may
rely on summary reports to document the use of a
guidance, special control or provide declarations of
conformity to an FDA consensus standard.
In August 2010, the FDA released a report on its

internal evaluation of aspects of the medical device
regulatory process and some proposals for its
improvement. These have not been implemented
but two are of special significance to the 510(k)
process.
FDA Actions
When the FDA has accepted the submission as
administratively complete, the review begins. If the
submission is determined to be incomplete, notice
is given to the submitter and an opportunity to
provide the elements missing from the submission.
Once the 510(k) is deemed complete and accepted,
the review begins. When the review is complete,
the FDA may issue an order declaring the device
to be substantially equivalent to a predicate device,
or declaring the device to be not substantially
equivalent, or requesting additional information.
Requests for additional information occur
regularly. As soon as an order declaring a device
to be substantially equivalent to the predicate is
received, the device may be marketed.
There are two features of the 510(k) process which
require special mention; user fees and third party
review.
User Fees
The 510(k) submitter must pay a fee at the time of
submission. The standard fee for fiscal year 2011
is $4,348. The small business fee, for companies
with $100 million or less in gross receipts or sales, is
$2,174. There is no fee for a third-party reviewed
510(k) but that reviewer usually charges a fee125.
Third Party Review
Under the Accredited Persons Program, devices
designated by the FDA may be reviewed by a party
accredited by the FDA for that device126.
This program permits the primary review of a
510(k) to be accomplished outside of the agency. It
is an alternative to the FDA review although the
FDA makes the final decision.
Upon completion of the review by the accredited
entity, the 510(k) and a recommendation are
forwarded to the FDA. The FDAs decision
must be made within 30 days of receiving the
recommendation.
FDA may request clinical data be submitted in

support of a 510(k) notification to determine
substantial equivalence. This request often
comes during the review and may cause extended
delays. The report made recommendations on
how to enhance regulatory predictability, one of
which was to establish a new Class II b device.
This class designation would provide notice to
potential submitters that clinical or manufacturing
information would be required to support a
substantial equivalence determination. Guidance
for Class II b devices would give clarification at
the outset of what was required in a 510(k) for a
substantial equivalence determination.
Another relevant recommendation was for
clarification of the substantial equivalence
standard. This standard has been more difficult to
apply in a consistent manner with the increase in
number, complexity and variety of devices.
These are two of the significant recommendations
which may be implemented in the future to improve
the 510(k) process.
17.6. PREMARKET APPROVAL
Devices which are categorized in Class III either by
regulation or statute and not reclassified into Class
I or II are subject to the more intensive review of a
PMA. The PMA must be approved by the FDA127.
Approval requires the submission of data and
information upon which the FDA can make a
determination that the device is safe and effective
for its intended use. The approval is device specific
and belongs to the applicant.
The content of a PMA is described in the FDAs
regulations128. It will include such information as
non-clinical laboratory studies, clinical investigation,
a description of the device and the methods,
facilities and controls used in the manufacture of
the device.
Note that clinical investigations in the United States
are subject to the requirement of the investigational
device exemptions regulation129. Great emphasis is
placed upon the protection of those participating
in the study. Foreign studies are acceptable if they
meet specified criteria130.
There is an alternative route to receive an approved
PMA called a Product Development Protocol
(PDP). This is a procedural option which involves
early agreement with the FDA as to what is needed
116
to demonstrate safety and effectiveness. Reports are

submitted periodically during the developmental
and testing phases to which the FDA provides
responses as required.
Once a PMA is submitted to the FDA, the
agency may approve the application, issue a not
approvable letter or a deficiency letter either of
which could request additional information.
User Fees
There are user fees required with the filing of a
PMA. The standard fee for a PMA in fiscal year
2011 is $236,298; the small business fee is $59,075.
For the first PMA for companies with gross receipts
or sales of $30,000,000 or less the fee is waived 131.
17.7. SUMMARY
In determining how a device is to be regulated and
what premarket review requirements apply or if the
device is exempt, the following factors are important
in making a decision on how to proceed:
1. Is the product regulated as a medical device?
2. Is it subject to a classification regulation? If yes,
is premarket review, i.e., a 510(k) or PMA,
required?
3. If it is not subject to a classification regulation,
is there a predicate device with a 510(k)
authorization?
4. If it is subject to 510(k) review, must it be a
traditional form or may it be abbreviated?
5. What information needs to be submitted to

demonstrate substantial equivalence?
6. Is the device eligible for third party review?
Responses to these questions will provide
direction in what premarket review requirements
apply and will provide guidance on how to
develop the required submission.
17.8. CONCLUSION
Understanding the FDA regulatory requirements
and procedures is essential to a persons ability to
bring a medical device to market in the United
States. It is key to the efficient and effective decision
making inherent in the development of a device
and positioning it for premarket review.
It is possible for companies to prepare their own
applications for submission to the FDA, or they
can work through companies that specialize in
compiling regulatory submissions. There are many
service providers that can advise and prepare
510(k) and PMA applications on behalf of Swiss
companies, as well as provide guidance on dealing
with FDA inspections, audits and other aspects
of compliance. It is important to point out that
most U.S. distributors and agents are not willing
to discuss a possible business venture until after
a product has received FDA approval. However,
major OEMs are sometimes willing to invest
in start-up companies that have a promising
technology.
18. Product Liability Legal Aspects

Richard M. Franklin, Partner, Baker & McKenzie
Swiss manufacturers selling or distributing
medical devices in the United States should
exercise particular care because United States
product liability law and court procedures are, in
numerous important respects, different from the
law and procedures in Switzerland. In virtually
every respect, these differences are favorable to the
plaintiff and enhance the plaintiff s likelihood for a
substantial recovery.
be found in codified laws passed by legislatures.

Instead, product liability law results primarily from
the development of the law by judicial decisions.
This raises a degree of uncertainty, as the law needs
to be derived from an analysis of the applicable
judicial decisions rather than through reference to
a code. Moreover, the common law, by its nature,
is in constant evolution and is always subject to
alteration by subsequent judicial decisions.
Moreover, United States product liability law is

complicated by the following two factors. First,
U.S. product liability law is almost entirely the law
of the 50 individual states. Although the product
liability laws of the 50 states have many similarities,
there are some material differences. This means
that there may be differences in otherwise identical
product liability litigation if the applicable law is,
for example, the law of New York rather than the
law of California. Second, U.S. product liability
law is predominately judge-made common law
and not legislative law. This means that the body
of U.S. product liability law generally is not to
Bearing these uncertainties in mind, the discussion

below will include the following topics: (1) the
legal basis for U.S. product liability law focusing
on the doctrine of strict liability in tort; (2) the
damages that may be awarded in a U.S. product
liability suit; (3) the procedural aspects of a U.S.
product liability suit, particularly as they are
distinctive from Swiss litigation procedures; (4)
product liability exposure through mergers and
acquisitions; and (5) methods and practices that can
reduce U.S. product liability risks.
117
18.1. THE LEGAL BASIS FOR

U.S. PRODUCT LIABILITY
The vast majority of the states of the United States
have adopted the doctrine of strict product liability
in tort. Although there are some material variations
among the states, the following will summarize the
general principles:
The General Rule
The general rule for strict product liability in tort
for medical devices is as follows:
or (ii) the patient when the manufacturer knows or

has reason to known that healthcare providers will
not be in a position to reduce the risks of harm in
accordance with the instructions warnings. With
regard to category (i), the learned intermediary
rule generally provides that a manufacturer of a
prescription medical device does not have a legal
duty to warn the patient of potential hazards of a
product, but that the manufacturers duty is limited
to providing adequate warnings to the physician or
other healthcare provider.
Defenses
A manufacturer of a medical device who sells or

otherwise distributes a defective medical device is
subject to liability for harm to persons caused by
the defect.
Definition of Defect
In order for there to be product liability, the
medical device product has to be defective. A
medical device can be defective in any of the
following three ways:
Manufacturing Defect
A manufacturing defect includes any flaw or
deficiency arising at any stage of the manufacturing
process and may result from improper production,
assembly, packaging or transportation of the
medical device.
Design Defect
Even if properly manufactured, a product may be
defective if it is designed in such a way that it is not
reasonably safe. A medical device is not reasonably
safe due to a design defect if the foreseeable risks of
harm posed by the medical device are sufficiently
great in relation to its foreseeable therapeutic
benefits that reasonable healthcare providers,
knowing of such foreseeable risks and therapeutic
benefits, would not prescribe the medical device for
any class of patients.
With regard to unavoidably unsafe products, most
courts will not find liability provided that the
product was properly prepared and marketed, and a
proper warning was given. Some courts engage in
a risk-utility test under which a key factor may be
the availability of a feasible safer alternative design.
Warning/Instructions Defect
Even if the medical device is completely free from
both manufacturing and design defects, it still
may be defective if it is not reasonably safe due
to inadequate instructions or warnings. This is
the case if reasonable instructions or warnings
regarding foreseeable risks of harm are not provided
to: (i) prescribing and other healthcare providers
who are in a position to reduce the risks of harm
in accordance with the instructions or warnings;
The available defenses to a product liability claim

involving a medical device are quite limited.
Significantly, contributory or comparative
negligence generally is not a defense. The following
defenses may be available:
FDA Preemption
In 1976, Congress enacted the Medical Device
Amendments (the MDA) to the Food, Drug &
Cosmetic Act (the FDCA). The MDA included
the following preemption clause:
No State or political subdivision of a State may
establish or continue an effect with respect to a
device intended for human use any requirement
(1) which is different from, or in addition to
any requirement applicable under this chapter to
the device, and (2) which relates to the safety or
effectiveness of the device or to any other matter
included in a requirement applicable to the device
under this chapter.
The jurisprudence up to 1996 largely held that this
clause preempted most state law claims against
manufacturers of medical devices. This meant
that there were no state law product liability
claims available with respect to products that
were approved by the FDA and conformed with
FDA regulation. However, in 1996, the Supreme
Court decided Medtronic v. Lohr, 518 U.S. 470
(1996), which has resulted in a confusing and
inconsistent subsequent jurisprudence. Based on
Medtronic, the lower courts virtually unanimously
have found that there is no express preemption of
state product liability litigation concerning medical
devices that received FDA approval through the
substantial equivalence process. This is very
significant, since this is the method of approval
used for many medical devices. More recently, in
2008, the Supreme Court in Riegel v. Medtronic,
Inc., 552 U.S. 312 (2008), held that there is federal
preemption of state product liability claims arising
from medical devices approved pursuant to the
FDAs pre-market approval process.
118
State of the Art

Some states allow the defendants to escape liability
if they can demonstrate that the product meets the
state of the art at the time the product was released
into the marketplace. Generally, state of the art
means the technological or scientific knowledge
existing as of the relevant point in time.
Assumption of Risk
The defense of assumption of risk applies when
the person injured used the product voluntarily and
unreasonably exposed himself to the risk posed by
the product with knowledge of the danger.
Misuse
The defense of misuse applies when an
unforeseeable, abnormal use of a product causes
the injury.
Alterations/Modifications
The defense of alteration or modification arises
when there has been a substantial change in the
condition of the product after it has been sold.
Statute of Limitations/Statute of Repose
The time period under which suit must be brought
and other issues relating to the application of the
statute of limitations and/or statute of repose
generally are determined by the law of the state in
which the suit is brought. The period for the statute
of limitations, depending on the state involved,
generally is between 2 and 5 years. However, this
time period generally only begins to run when the
plaintiff is injured or discovers his injury.
In order to prevent unfair results, a number of
states have enacted an additional defense called the
statute of repose. Unlike the statute of limitations,
a statute of repose generally starts running on
the date of manufacture, delivery or sale of the
product. The time period generally is rather long,
between 8 and 12 years.
18.2. DAMAGES
There are certain significant distinctions in the
availability of compensatory and punitive damages
to a United States product liability plaintiff:
Compensatory Damages
Product liability plaintiffs in the United States,
like product liability plaintiffs in Switzerland,
can recover compensatory damages for economic
damages such as medical costs, lost wages and
property damage, as well as for non-economic
damages such as pain and suffering and emotional
distress.
The principal difference with regard to
compensatory damages is quantitative rather than
qualitative. In general, a United States plaintiff has

the potential to recover a much larger amount of
compensatory damages. In cases involving serious
physical injury, recoveries of compensatory damages
ranging from hundreds of thousands to millions of
dollars are not at all uncommon. The rationale for
such relatively large recoveries is often attributed
to the jury system and to the absence in the United
States of a highly developed social network, which
would provide universal protection from certain
risks for which compensatory damages otherwise
provide compensation.
Punitive Damages
Punitive damages are damages intended to punish
the wrongdoer, not to compensate the injured
party. They are generally awarded in the United
States only when the wrongdoer intends to cause
harm or engages in acts that the wrongdoer knows
or should know are very likely to cause harm.
Although the risk of punitive damages may not be
great, the possibility that they may be awarded in
United States product liability litigation is a material
distinction for Swiss medical device manufacturers
entering the United States market.
A series of recent Supreme Court decisions
further has diminished some of the risk of punitive
damages. Most significantly, in BMW of North
America, Inc. v. Gore, 517 U.S. 559 (1996), the
Supreme Court held that judges are to scrutinize
all jury awards of punitive damages considering:
(1) the degree of reprehensibility of the defendants
misconduct; (2) the disparity between the actual
or potential harm suffered by the plaintiff and the
punitive damages award; and (3) the difference
between the punitive damages awarded and the civil
penalties authorized or imposed in similar cases.
In State Farm Mutual Automobile Insurance Co.
v. Campbell, 538 U.S. 408 (2003), the Supreme
Court further held that few punitive awards will
survive scrutiny that exceed a single digit (9:1) ratio
between punitive and compensatory damages,
and cited a 4:1 ratio as close to the line of
constitutional impropriety.
18.3. PROCEDURAL ASPECT OF A U.S.
PRODUCT LIABILITY
The procedural differences between a United States
and a Swiss product liability suit are probably even
more striking than the substantive distinctions.
Seven of the principal procedural distinctions are
discussed below:
Jurisdiction
The jurisdiction of the United States courts over
a Swiss manufacturer of medical devices is not
dependent upon the manufacturer having consented
to jurisdiction or having a place of business in the
United States. Substantially all of the states of
the United States have enacted so-called long-arm
statutes, which can provide very broad grounds for
119
jurisdiction over a Swiss manufacturer. Jurisdiction

may be based on a Swiss manufacturers activities,
however limited, in connection with the sale or
distribution of its medical devices causing injury
to a United States party. Courts typically find that
these actions constitute the transaction of business
or the commission of a tortuous act within a state
of the United States.
States plaintiff to send the summons and complaint,

together with a short form and a translation of
the pleadings into the language of the recipient,
to the cantonal Central Authority designated by
Switzerland, which then serves the pleadings in
accordance with its own procedures.
Pleadings and Service of Process:
A class action is a case brought by one or more

representative plaintiffs on behalf of a larger group
of similarly situated plaintiffs. It is a procedural
device under which either one or a few plaintiffs
may represent the claims of a much larger class of
allegedly injured parties. Successful product liability
class actions have been brought against medical
device manufacturers on behalf of the entire class
of persons who allege they have been injured as a
result of allegedly defective medical devices. The
particular danger in class actions is that the total
amount of the claim may be so enormous that the
defendant manufacturer may be threatened with
bankruptcy.
Pleadings
Pleadings under United States procedure tend to
be short and concise and need only provide the
parties with notice of the claim or defenses. United
States pleadings will not contain references to the
evidence that may prove the pleadings allegations.
A complaint must only include a description
of the parties, a statement justifying the courts
subject matter jurisdiction, a brief description of
the plaintiff s claim and a request for relief. The
exact amount in dispute generally does not have
to be stated; it is usually sufficient to state that the
amount of the claim exceeds the minimum amount
required in order to establish the courts jurisdiction.
However, under a pair of recent decisions, the
Supreme Court has made clear that a plaintiff
must do more than solely recite the elements of a
violation and must plead with sufficient particularity
so that the right to relief is more than mere
conjecture, Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007), and that the plaintiff must plead facts
that, when accepted as true, show the plausibility
of the claim for relief, Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1947 (2009). Similarly, a defendants
answer need only provide a short response to each
allegation in the complaint, indicating whether
the allegation is admitted or denied, or whether
the manufacturer lacks sufficient information to
answer the allegation, together with any affirmative
defenses that the defendant may wish to raise.
Service of Process
A Swiss medical device manufacturer has no
obligation to defend against the complaint until
a copy of the summons and complaint has been
properly served upon the manufacturer. If the
Swiss manufacturer has a branch or other agent
in the United States, the summons and complaint
generally can be served upon the branch or the
agent. If the Swiss manufacturer does not have
a branch or other agent in the United States, the
summons and complaint must be served upon the
foreign manufacturer in the foreign jurisdiction
where it is located. Under Volkswagenwerk AG
v. Schlunk, 486 U.S. (1988), such service must be
made under the Hague Service Convention. The
Hague Service Convention is an international treaty
to which the United States and approximately
35 other countries, including Switzerland, are
signatories. Under the Hague Service Convention,
the principal method of service requires the United
Class Actions
When a class action claim is filed, the court requires

that the class action plaintiff give notice to all
members of the potential class by the best available
method. In a relatively small case, the notice may
require a letter to be posted to each potential class
member. In a large case, the notice may take
the form of a newspaper advertisement. The
class members have the right to opt out, or not
participate in, the class action. Class members who
opt out will not benefit from any settlement or
judgment in favor of the class. On the other hand,
they will not be barred by an adverse judgment
against the class and they are free to file their own
individual actions, independent of the class action
against the defendant.
The court is required to hold a hearing as soon
as possible to determine whether the class action
should be maintained. At this hearing, the court
will address questions such as: (i) whether the class
is so numerous that individual suits are impractical;
(ii) whether there are questions of law or fact
common to the class; (iii) whether the claims or
the representative parties are typical of the claims
of the class; and (iv) whether the representative
parties and their lawyers will adequately protect the
interests of the class.
If a court decides after this hearing that a class
action is proper, the case proceeds much like
any other civil action, but it cannot be settled or
compromised without notice to the class members
and approval from the court.
The U.S. Congress addressed some of the perceived
excesses of class actions by the Class Action Fairness
Act of 2005. In particular, this Act now provides
that most larger class actions are to be brought in
federal court, rather than in state court, and that
judges are to give special scrutiny to class action
120
settlements that provide for recovery through

coupons, allowing for the discounted entitlement to
products or services, rather than through cash.
Discovery
Pretrial discovery is one of the hallmarks of the
United States procedural system. As little or no
discovery is available in Switzerland, this is one of
the major differences between the United States
and the Swiss procedural systems. The purpose of
discovery is to assure that the parties to the litigation
have available to them in advance of trial all the
evidence relating to the claims and defenses in the
case. This is to assist the parties in preparation for
trial, to prevent the presentation of any surprise
evidence at trial and to aid the parties in reaching
a possible settlement before trial. The available
discovery procedures include the following:
Mandatory Discovery Procedures
For actions proceeding in federal court, a
1993 amendment to the Federal Rules of Civil
Procedure obligates the parties to make certain
initial disclosures prior to conducting any other
discovery in the litigation. These initial disclosures
include: (i) the names and addresses of witnesses,
both favorable and unfavorable; (ii) copies or
descriptions of relevant documents, both favorable
and unfavorable; (iii) a computation of damages;
and (iv) copies of any insurance policy which may
be applicable to claims in the litigation.
Actions filed in state court may or may not have
mandatory disclosure requirements, depending on
the particular jurisdiction.
Other Discovery Procedures
In addition to mandatory discovery, the principal
discovery procedures that are available to the parties
in both federal and state courts include:
Each party is allowed to take the deposition of

potential witnesses. Depositions are a form of
testimony, but they are not taken in a courtroom,
and no judge is present. Instead, they are taken in
the lawyers office, with the lawyers for both sides
present, along with a court reporter who records
the testimony. The party taking the deposition is
allowed to ask the witness any question that may
lead to relevant evidence, and the witness is required
to answer under oath. The only basis for refusing
to answer a question is if the question would
intrude upon a privilege, such as the attorney-client
privilege which protects communications between
an attorney and the attorneys client. Due to the
lack of direct control by the judge, depositions may
be quite detailed, lengthy and expensive.
Electronic Discovery
Amendments to the Federal Rules of Civil
Procedure effective in 2006 have established a
new focus on electronically-stored information
(ESI). The rules now specifically provide that a
party may serve requests to produce and permit
inspection, copying, testing or sampling of ESI.
The request may specify the form in which ESI is
to be produced, and the respondent may have to
translate ESI into a reasonably usable form. The
rule provides some balance in that it expressly
provides that the respondent need not produce ESI
from sources that are identified as not reasonably
accessible due to burden or cost, but the respondent
has the burden of proof on this. Moreover, all ESI
need not be retained, as the rules expressly provide
that there are no sanctions, absent exceptional
circumstances, for ESI lost due to the routine
good-faith operation of an electronic information
system. What is critically important is that, in the
event of actual or reasonably anticipated litigation,
ordinary deletion and destruction practices must
be suspended and a hold imposed with regard to
potentially relevant electronic or other documents.
Hague Evidence Convention
Written interrogatories are questions prepared

by one party which the other party has to answer
under oath. Although some of the information
otherwise obtainable by written interrogatories
should be disclosed pursuant to the mandatory
discovery disclosures, this provides a method for the
parties to obtain additional information, particularly
regarding the identities of witnesses, the types and
location of documents, and details regarding the
opposing partys claims to the extent they are not
disclosed in the pleadings.
Through document production requests, a party
may request that the opposing party produce
documents that may lead to discovery of evidence
relevant to the claims and defenses in the litigation.
Although some of the documents should be disclosed
pursuant to the mandatory discovery disclosures,
document production requests give the parties an
opportunity to seek additional relevant documents.
The Hague Evidence Convention is an

international treaty signed by both the United
States and Switzerland. The Hague Evidence
Convention provides specific methods by which
United States litigants can obtain evidence under
the supervision of a foreign court from parties
residing abroad. Some foreign parties have raised
the Hague Evidence Convention as a defense to
United States discovery procedures by arguing
that all discovery taken from the foreign party
should be taken pursuant to the procedures of the
Convention. However, the United States Supreme
Court in Societ Nationale Industrielle Aerospatiale
v. U.S. District Court, 482 U.S. 522 (1987), held
that the Hague Evidence Convention is neither the
mandatory nor the preferred method for taking
evidence from foreign litigants. Instead, it is only an
optional method for taking discovery from foreign
litigants and its use is to be determined by courts
121
on a case-by-case basis. After the Aerospatiale

decision, in deciding whether the use of the
Hague Evidence Convention should be required,
United States courts have looked to factors such
as: (a) how burdensome the discovery is; (b) the
sovereign interests of the countries involved; and
(c) the likelihood that resort to the Hague Evidence
Convention procedures will prove effective. In a
few cases, foreign parties have been successful in
convincing United States courts to require use of
the Hague Evidence Convention to the exclusion
of ordinary discovery rules; however, in most cases
they have not. Accordingly, it is probable that
a Swiss manufacturer involved in United States
product liability litigation will be fully exposed to
the usual United States discovery procedures.
Sanctions for Non-Compliance
In the event that any disputes arise regarding
discovery, they are brought to the judges attention
by a motion from the parties. After reviewing the
parties positions, the judge will either grant or
deny the requested discovery. If a party refuses
to comply with the judges order, severe sanctions
may be imposed, including the entry of a default
judgment against the non complying party.
Potential Impact on a Swiss
Medical Device Manufacturer
The potential impact of U.S. discovery upon a
Swiss medical device manufacturer cannot be
overemphasized. A Swiss manufacturer involved in
United States product liability litigation may find
itself required to produce its documents relating to
the research and development, design, manufacture,
testing and marketing of its medical devices, and to
present for depositions its management, research,
engineering, manufacturing and marketing
employees who may possess knowledge that may
lead to relevant evidence supporting the plaintiff s
claims or the manufacturers defenses. Claims
that documents have been lost or destroyed are
ill-received and may lead the judge to instruct the
jury to infer that the missing documents contained
information adverse to the manufacturer. Not only
can United States discovery cause liability risks to
a Swiss manufacturer that it may not experience
in Switzerland, but the process of answering
interrogatories, producing documents and
presenting witnesses for depositions can be quite
time-consuming and expensive.
Use of Experts
Expert witnesses are used with great frequency
in United States product liability cases involving
medical devices. The plaintiff in most cases must
have an expert to testify that the medical device
was defective in its manufacture, design or safety
warnings, and in turn, the defendant will present
an expert to rebut the testimony of the plaintiff s
expert. In addition, expert witnesses may be used
at trial on any other issue in which expert scientific,

technical or other specialized knowledge will assist
the jury. For example, experts often are used to
establish damages by proving the economic effect of
an injury.
In many foreign jurisdictions, experts are designated
by the court and their fees and expenses are assessed
as a court cost. The use of experts in the United
States is distinctive because experts almost never
are designated by the court but instead are selected
and paid by the parties. Thus, an expert witness
is more a part of the partys litigation team than
an impartial witness. Indeed, official recognition
of the close relationship between trial counsel
and the testifying expert witness will be afforded
by proposed amendments to the Federal Rules of
Civil Procedure scheduled to become effective on
December 1, 2010, which expressly exclude from
discovery drafts of reports prepared by the testifying
expert witness and likewise shield from discovery
most other communications between trial counsel
and the testifying expert witnesses. Often there will
be conflicting evidence between expert witnesses
engaged by the opposing sides, and it will be the
jurys or the judges task to decide which expert to
believe.
Certain United States Supreme Court decisions
have placed some limitations upon the use of
experts in federal court. In Daubert v. Merrell
Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993),
the United States Supreme Court directed the
trial judges to make a preliminary assessment as
to whether an experts reasoning or methodology
is scientifically valid and can be properly applied
to the facts at issue. The Supreme Court stated
that many considerations will bear on the inquiry,
including whether the theory or technique in
question has been tested, whether it has been
subject to peer review and publication, what its
error rate is and whether it has attracted wide
spread acceptance within the scientific community.
In Kumho Tire Co. v. Carmichael, 526 U.S. 137
(1999), the Supreme Court further held that the
general principles of Daubert apply to all expert
testimony, including the testimony of non-scientific
experts. These decisions have had a significant effect
in limiting the submission of expert reports based
upon unsubstantiated conclusions.
Trial By Jury
Under United States procedure, plaintiffs in product
liability claims are entitled to a trial by jury, and
they almost always exercise this right. Product
liability claims that go to trial therefore almost
always are decided by a jury of six or twelve lay
people. From the point of view of a Swiss medical
devices manufacturer, this provides an element of
risk different in character from the risk to which it is
accustomed in Switzerland.
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Attorneys Fees and Costs

Swiss medical device manufacturers are accustomed
to a system where the losing party in litigation
reimburses the winning partys attorneys fees,
where contingency fees are impermissible and
where costs are sufficiently high to act as a deterrent
to the filing of litigation. The United States
procedural system takes a different approach on all
these points:
In the case of either a merger or a consolidation,

the surviving or new company is fully liable for all
product liability claims asserted against any of the
constituent entities arising either before or after the
merger or consolidation. In other words, a Swiss
medical device manufacturing company that is a
party to a merger or consolidation will find its assets
fully exposed to product liability claims that have
been, or will be, asserted against the U.S. companies
that were constituents of the transaction.
Acquisitions
Reimbursement of Attorneys Fees

Under the general American rule, the parties
generally always bear their own attorneys fees,
irrespective of whether they win or lose the case.
There are no mandatory fee schedules in the United
States, and attorneys fees generally are determined
on the basis of hourly rates, or, as discussed below,
on a contingency basis.
Contingency Fees
In a United States product liability case, it is almost
a certainty that the plaintiff is represented by an
attorney on the basis of a contingency fee, which
is legally and ethically permissible in the United
States. Under a typical contingency arrangement,
the plaintiff s attorney will receive between 20 and
40 percent of the amount recovered by a verdict or
a settlement.
Costs
Although a winning party in United States litigation
generally has a right to recover court costs from
the losing party, court costs in a United States
proceeding generally are nominal, not determined
on the basis of the amount in controversy and do
not act as a deterrent to the filing of litigation.
18.4. PRODUCT LIABILITY EXPOSURE
THROUGH MERGERS/CONSOLIDATIONS
AND ACQUISITIONS
A Swiss medical device manufacturer may seek
to increase its business in the United States by
acquiring an existing U.S. corporation. In so doing,
the Swiss medical device manufacturer may become
exposed to product liability claims resulting from
medical devices that the U.S. company has sold
either before or after the acquisition. The following
will discuss such exposure as it may result from
mergers/consolidations and from acquisitions.
Mergers/Consolidations
A merger is a transaction in which two or more
constituent companies combine to form a single
new entity with one of the constituent companies
becoming the surviving company and carrying on
the business. A consolidation is similar, except that
a new company is formed to carry on the combined
business.
The two forms of acquisitions, stock acquisitions

and asset acquisitions, can yield quite different
results regarding product liability risks, and they are
discussed separately hereunder:
Stock Acquisitions
In a stock acquisition, the Swiss medical device
manufacturer acquires the issued stock of the U.S.
company. As long as the U.S. company continues
to operate as an independent subsidiary, the Swiss
manufacturer would not have direct liability for
product liability claims that might be asserted
against the U.S. company. However, there are
exceptions to this general rule. One exception is
the doctrine of piercing the corporate veil. The
U.S. courts may permit product liability claimants
to pierce the corporate veil of a U.S. subsidiary and
impose liability on the Swiss parent, provided that
there is proof that (i) the Swiss parent unreasonably
dominated and controlled the business and
operations of the U.S. subsidiary and (ii) such
domination and control led to fraud or an unjust
result.
Asset Acquisitions
In an asset acquisition, the Swiss medical device
manufacturer acquires the assets of a U.S. company.
The transaction can be structured so that only
assets are transferred, and liabilities, including
product liability claims in particular, are excluded
from the acquisition. As a general matter, the Swiss
manufacturer would not be responsible for product
liability claims resulting from the operations of the
U.S. company prior to the transaction.
However, the U.S. courts recognize four exceptions
to this general rule. These exceptions occur where:
(i) there has been an express or implied agreement
that the purchaser will assume the sellers liabilities;
(ii) the transaction is a de facto merger of the
purchaser and the seller; (iii) the purchaser is a
mere continuation of the seller; or (iv) the seller
transferred its assets with actual fraudulent intent to
avoid, hinder or delay its creditors.
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Summary
Two important points emerge from the foregoing
for Swiss medical device manufacturers who are
contemplating a merger/consolidation with, or
an acquisition of, a U.S. company. First, the Swiss
manufacturer should conduct very careful due
diligence to determine the extent to which product
liability claims have been or may be asserted against
the U.S. company. Second, Swiss manufacturers
should seek expert legal advice regarding structuring
the transaction so as to minimize the likelihood that
its assets will become subject to product liability
claims resulting from the U.S. companys operations.
18.5. REDUCING THE RISK
OF PRODUCT LIABILITY
Any Swiss medical device manufacturer selling its
products into the United States should institute
programs in order to reduce its U.S. product liability
risks. The program should include the following:
State of the Art Design
All medical devices sold in the United States
should fully meet all design standards set by the
FDA as well as by trade associations, professional
societies and technical organizations and other
standard setting groups. In addition, Swiss medical
device manufacturers should strive for their
product designs to meet the highest state of the art
prevailing in the industry.
Quality Control
Careful attention should be given to every phase of
manufacturing medical devices including materials
and component selection, assembly, testing and
inspection, packaging, storage and handling.
Comprehensive and effective quality control of
manufacturing standards is absolutely essential.
warnings or a recall of the product, if necessary.

Preservation of Records
Careful records must be kept in order to document
that all standards are met with regard to the
design and manufacturer of medical devices. Of
particular importance are documented standard
operating procedures that evidence that regulatory
requirements and appropriate manufacturing
processes have been followed, that provide for
critical functions such as adverse event reporting,
and that demonstrate meaningful employee
training and quality assurance. This is particularly
important in light of the obligation in U.S. discovery
proceedings to provide records to the plaintiff.
Insurance
Insurance plays a significant role in protecting
medical device manufacturers against United
States product liability risks. The insurance carrier
providing product liability coverage, subject to the
terms and limitations of the insurance policy, will
indemnify the manufacturer against payments that
must be made as a result of a judgment (although a
punitive damages award generally will be excluded
from coverage) or as a result of a settlement.
Moreover, the insurance carrier will generally
provide a defense to product liability litigation and
will assume the costs of the attorneys representing
the medical device manufacturer and the expert
witnesses testifying on the manufacturers behalf.
Any Swiss manufacturer selling or otherwise
distributing a product in the United States market
should obtain insurance coverage sufficient in
amount and scope to cover its United States product
liability risks. Particular care should be taken to
ensure that their insurance is sufficient because
non- United States general liability policies often
exclude United States product liability risks from
their coverage.
Warnings and Instructions

Warnings and instructions must be formulated
and provided for healthcare providers and, if
the healthcare providers will not be in a position
to reduce the risks of harm, for patients as well.
Warnings and instructions must take into account
all foreseeable risks of harm resulting from both
use and misuse of the medical device. They must
be clear, intelligible & appropriately prepared
for understanding by either medical providers or
patients. Also, as relevant information is obtained,
warnings and instructions need to be updated
and systems need to be in place to provide such
information to existing users of the medical devices.
Monitoring and Follow-up with Customers
Lines of communication should be open with both
medical care providers and patients. This will
facilitate prompt notice of any possible defects in
the medical device and additional instructions or
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19. Annexes
19.1. ANNEX I: LINKS TO DATA SOURCES
American Heart Association:
www.americanheart.org
BCC Research, Inc.:
www.bccresearch.com
Biomet, Inc.:
www.biomet.com/corporate/index.cfm
Centers for Medicare and Medicaid:
www.cms.hhs.gov
DataMonitor:
www.datamonitor.com
Dental Products Report:
www.dentalproductsreport.com
Espicom Business Intelligence:
www.espicom.com
Freedonia Group:
www.freedoniagroup.com
Frost & Sullivan:
www.frost.com
GlobalData:
www.globaldata.com
Global Industry Analysts:
www.strategyr.com
Global Markets Direct:
www.globalmarketsdirect.com
IBISWorld:
www.ibisworld.com
Kaiser Family Foundation:
www.kff.org
Market Strategy Group:
www.mkt-strat.com
National Center for Health Statistics:
www.cdc.gov/nchs
Stryker Corp.:
www.stryker.com/en-us/index.htm
U.S. Census Bureau:
www.census.gov
19.2. ANNEX II: TRADE ASSOCIATIONS,

TRADE SHOWS, AND PUBLICATIONS
Trade Associations
The Advanced Medical Technology
Association (AdvaMed) is the largest medical
technology association in the world. The
association represents more than 1,300 innovators
and manufacturers of medical devices, diagnostic
products and medical information systems. Its
members manufacture almost 90 percent of the
healthcare technology products purchased annually
in the U.S. and more than 50 percent of the
healthcare technology products purchased annually
worldwide. www.advamed.org
The Health Industry Distributors
Association (HIDA) is the international trade
association representing medical products
distributors. Since 1902, HIDA has provided
leadership in the healthcare distribution industry.
From education programs and benchmarking
studies to business tools and resources, HIDA
ensures that members have the business and
industry information they need to perform
profitably in todays complex healthcare supply
chain. www.hida.org
The Independent Medical Distributors
Association (IMDA) is an association of specialty
medical products sales and marketing organizations.
Their main focus is to bring truly innovative
technologies to healthcare providers. The
association offers a membership directory listing
about 60 independent specialty medical product
distributors covering the entire U.S. www.imda.org
The Medical Device Manufacturers
Association (MDMA) is a national trade
association based in Washington, D.C. which
represents independent manufacturers of medical
devices, diagnostic products and healthcare
information systems. MDMA seeks to improve
the quality of patient care by encouraging the
development of novel research driven medical
technology and fostering the availability of
beneficial innovative products.
www.medicaldevices.org
The Alliance of Cardiovascular
Professionals (ACVP) has a membership of
over 3000 professionals involved in all levels
of cardiovascular service (administration,
management, nursing and technology), and
involved in all specialties (invasive, noninvasive,
echo, cardiopulmonary). The organization seeks to
meet the needs of all cardiovascular and pulmonary
providers, promulgate standards, and promote
recognition of the cardiovascular profession.
www.acp-online.org
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The American Association of

Cardiovascular and Pulmonary Rehabilitation
(AACVPR) was founded in 1985 and is dedicated
to the professional development of its members,
through information, networking, and educational
opportunities. Central to the mission is the
improvement in the quality of life for patients and
their families. Their mission is to reduce morbidity,
mortality, and disability from cardiovascular and
pulmonary diseases through education, prevention,
rehabilitation, research, and aggressive disease
management. www.aacvpr.org
The American College of Cardiology (ACC)
was chartered and incorporated as a teaching
institution in 1949, and established its headquarters,
called Heart House, in Bethesda, Maryland in
1977. The mission of the ACC is to advocate for
quality cardiovascular carethrough education,
research promotion, development and application
of standards and guidelinesand to influence
healthcare policy. www.acc.org
The American Heart Association (AHA) is a
national voluntary health agency whose mission
is: Building healthier lives, free of cardiovascular
disease and stroke. The associations impact goal
is to reduce coronary heart disease, stroke and risk
by 25% by 2010. AHA is divided physically into
the National Center (located in Dallas, TX) and
8 affiliate offices that cover the United States and
Puerto Rico. Millions of volunteers and donors
support AHAs efforts every year.
www.americanheart.org
The American Dental Association (ADA) is the
professional association of dentists committed to the
public's oral health, ethics, science and professional
advancement. The ADA leads a unified profession
through initiatives in advocacy, education, research
and the development of standards. The ADA was
established in 1859 and has over 157,000 dentist
members today. www.ada.org
The American College of Healthcare
Executives (ACHE) is an international professional
society of 30,000 healthcare executives who lead
the nation's hospitals, healthcare systems, and
other healthcare organizations. ACHE is known
for its prestigious credentialing and educational
programs and its annual Congress on Healthcare
Management, which draws more than 4,000
participants each year. ACHE is also known for its
journal, the Journal of Healthcare Management,
and magazine, Healthcare Executive, as well as
ground-breaking research and career development
and public policy programs. ACHE's publishing
division, Health Administration Press, is one of
the largest publishers of books and journals on all
aspects of health services management in addition
to textbooks for use in college and university
courses. Through such efforts, ACHE works toward
its goal of being the premier professional society for
healthcare leaders by providing exceptional value to

its members. www.ache.org
The American Hospital Association (AHA) is
the national organization that represents and serves
all types of hospitals, healthcare networks, and their
patients and communities. Nearly 5,000 hospitals,
healthcare systems, networks, other providers of
care and 37,000 individual members come together
to form the AHA. Through their representation and
advocacy activities, AHA ensures that members'
perspectives and needs are heard and addressed
in national health policy development, legislative
and regulatory debates, and judicial matters. Their
advocacy efforts include the legislative and executive
branches and include the legislative and regulatory
arenas. Founded in 1898, the AHA provides
education for healthcare leaders and is a source of
information on healthcare issues and trends.
www.aha.org
The American Academy of Orthopedic
Surgeons (AAOS) provides education and practice
management services for orthopedic surgeons
and allied health professionals. The Academy also
serves as an advocate for improved patient care and
informs the public about the science of orthopedics.
Founded in 1933, the Academy has grown from a
small organization serving less than 500 members
to the world's largest medical association of
musculoskeletal specialists. The Academy now
serves more than 36,000 members worldwide.
Members of the Academy, called fellows, are
orthopedists concerned with the diagnosis, care,
and treatment of musculoskeletal disorders. The
orthopedists scope of practice includes disorders
of the body's bones, joints, ligaments, muscles,
and tendons. Fellows have completed four years
of medical school and at least five years of an
approved "residency" in orthopedics. In addition,
they must pass a comprehensive oral and written
examination, be certified by the American Board
of Orthopedic Surgery, and submit to stringent
membership review processes prior to admittance to
the Academy. www.aaos.org
Founded in 1887, The American Orthopedic
Association (AOA) is the oldest and most
distinguished orthopedic association in the world.
The mission of the AOA is to identify, develop,
engage and recognize leadership to further the art
and science of orthopedics. The AOA is dedicated
to developing future leaders to serve the specialty in
communities, orthopedic organizations, businesses
and civic endeavors. AOA's development and
support of advanced courses on leadership allow
members to hone their leadership abilities. The
AOA has over 1,500 members. www.aoassn.org
Founded in 1847, the American Medical
Association (AMA) is the leading advocate for
physicians and their patients, always working to
improve America's healthcare system. The mission
of the AMA is to promote the art and
126
science of medicine and the betterment of public

health. The AMA helps doctors help patients by
uniting physicians nationwide to work on the most
important professional and public health issues.
www.ama-assn.org
The American Association for Thoracic
Surgery (AATS) was founded in 1917 by
representatives from the specialties of Anatomy,
Physiology, Pathology, Internal Medicine, Surgery,
Roentgenology, Broncho and Esophagoscopy and
Anesthesia, to foster the evolution of an interest
in surgery of the Thorax. Since that date, the
AATS has continually encouraged and stimulated
education and investigation into the areas of
intrathoracic physiology, pathology and therapy.
Originally created by a group of twenty of the
last centurys earliest pioneers in the field of
thoracic surgery, the AATS has now grown to an
international organization of over 1,200 members
which consist of the worlds foremost cardiothoracic
surgeons representing 35 countries throughout the
world. www.aats.org
The American Academy of Physical
Medicine & Rehabilitation is the national
medical society representing more than 7,500
members who are specialists in the field of physical
medicine and rehabilitation. These specialists
focus on restoring function, and care for patients
with acute and chronic pain, and musculoskeletal
problems including back and neck pain, tendonitis,
and pinched nerves. They also treat patients who
have suffered from catastrophic events and disease
which have affected physical movement and motion.
The Academy represents more than 87 percent of
U.S. physiatrists and international colleagues from
37 countries. www.aapmr.org
The American Occupational Therapy
Association is a national professional association
of approximately 39,000 occupational therapists,
occupational therapy assistants, and students of
occupational therapy. Members reside in all 50
states, the District of Columbia, Puerto Rico, and
internationally. These practitioners work with
people experiencing health problems such as stroke,
spinal cord injuries, cancer, congenital conditions,
developmental problems, and mental illness.
www.aota.org
The American Physical Therapy Association
is a national professional organization of more than
74,000 members. Its goal is to foster advancements
in physical therapy practice, research, and
education, and to further the profession's role in the
prevention, diagnosis, and treatment of movement
dysfunctions and the enhancement of the physical
health and functional abilities of members of the
public. www.apta.org
The Medical Group Management
Association (MGMA) is the premier membership
association for professional administrators and
leaders of medical group practices. MGMA

serves 21,500 members who lead 13,700
organizations nationwide in which some 275,000
physicians provide more than 40 percent of the
healthcare services delivered in the U.S. Its diverse
membership comprises administrators, CEOs,
physicians in management, board members,
office manager and many other management
professionals. They work in medical practices and
ambulatory care organizations of all sizes and types,
including integrated systems and hospital- and
medical school-affiliated practices.
www.mgma.com
Major Trade Shows and Conferences
AAPM&R (American Academy of Physical
Medicine & Rehabilitation) 72nd Annual
Assembly & Technical Exhibition
17-20 November 2011
Gaylord Palms Hotel & Convention Center
Orlando, FL
www.aapmr.org/assembly.htm
American Heart Association
Scientific Sessions 2011
12-16 November 2011
Orlando, FL
scientificsessions.americanheart.org/portal/
scientificsessions/ss/sessions2011
Transcatheter Cardiovascular Therapeutics (TCT)
7-11 November 2011
The Moscone Center
San Francisco, CA
www.tctconference.com/about-crf.html
Medical Design & Manufacturing, Minneapolis
2-3 November 2011
Minneapolis Convention Center
Minneapolis, MN
www.canontradeshows.com/expo/minn10/
MED + Surg Conference and Expo
Sponsored by the Health Industry
Distributors Association
19-21 October 2011
Charlotte Convention Center
Charlotte, NC
www.hida.org/AM/Template.cfm?Section=Events1
American Dental Association
152nd Annual Session
10-13 October 2011
Las Vegas, NV
www.ada.org/345.aspx
AdvaMed 2011
26-28 September 2011
Walter E. Washington Convention Center
Washington, DC
advamed2011.com/
127
FIME 2011
10-12 August 2011
Miami Beach Convention Center
Miami Beach, FL
www.fimeshow.com
Association for the Advancement of Medical
Instrumentation AAMI 2011 Conference & Expo
25-27 June 2011
Henry B. Gonzalez Convention Center
San Antonio, TX
www.aami.org/meetings/aami2011/theexpo.html
Investment In Innovation (In3) East
21-23 June 2011
Hyatt Regency Hotel
Boston, MA
www.medtechinsight.com/conferences.html
OMTEC Orthopedic Manufacturing
Technology Exposition & Conference
15-16 June 2011
Donald E. Stephens Convention Center
Chicago, IL
www.orthoworld.com/site/index.php/products/
omtec
Medical Design & Manufacturing, East
7-9 June 2011
Jacob K Javits Convention Center
New York, NY
www.canontradeshows.com/expo/east10/
Society of Nuclear Medicine - 58th Annual
Meeting
4-8 June 2011
Henry B. Gonzalez Convention Center
San Antonio, TX
interactive.snm.org/index.cfm?PageID=9794
Heart Rhythm 2011 32nd Annual Scientific
Sessions
4-7 May 2011
The Moscone Center
San Francisco, CA
www.hrsonline.org/Sessions/futscisessions/
Medtrade Spring 2011
12-14 April 2011
Sands Expo and Convention Center
Las Vegas, NV
www.medtrade.com/medtrade_spring/
BIOMEDevice 2011
6-7 April 2011
Boston Convention & Exhibition Center
Boston, MA
www.canontradeshows.com/expo/bioboston10/
American College of Cardiology
ACC.11 & i2 Summit 2011
3-5 April 2011
New Orleans, LA
acc10.acc.org/Pages/ACC2010Home.aspx
American Academy of Orthopedic

Surgeons Annual Meeting
15-19 February 2011
San Diego Convention Center
San Diego, CA
www.aaos.org/education/anmeet/anmeet.asp
Medical Design & Manufacturing, West
7-10 February 2011
Annaheim, CA
www.devicelink.com/expo/west09/
Recent Shows
Medtrade 2010
15-18 November 2010
Georgia World Congress Center
Atlanta, GA
www.medtrade.com/medtrade/show/about-theshow
Medical Product Outsourcing Symposium
3-4 November 2010
The Conference Center at Waltham Woods
Waltham, MA
www.mposymposium.com
Investment In Innovation (In3) Medical Device
Summit
27-29 October 2010
Grand Hyatt Hotel
San Francisco, CA
www.medtechinsight.com/conferences.html
Major Industry Publications
American Medical News is the newspaper for
America's physicians. Published since 1958, it is
one of the most widely read publications in the U.S.
on news affecting the medical profession. From
Medicare and managed care to public health and
practice management, no other source covers the
same range of current events affecting medical
practice. American Medical News is published
by the American Medical Association. It has a
total print circulation of over 230,000 and is also
available online.
www.ama-assn.org/amednews/index.htm
BONEZONE, published by Orthoworld,
is the premier magazine for the Orthopedic
device manufacturing industry. The publication
addresses critical challenges in product design
and development, supply chain management and
regulatory processes, as well as insights into the
state of the industry and cutting edge technologies.
The primary readership includes supply chain
management, sourcing, engineering, and
executive level professionals at Orthopedic Device
Companies. BONEZONE is published quarterly
and has a worldwide circulation of more than
5,000. https://www.orthoworld.com/site/index.
php/products/bonezone_schedule
128
Dental Products Report and Dental Lab

Products, published by Advanstar Dental
Communications, are two premier product
publications serving the North American dental
market. The two print and online publications
provide a total monthly reach to over 213,000
dental and lab professionals, 144,000 dentists,
15,000 lab technicians, 3,000 dealers and 50,000
visitors each month. The tabloid newspaper
focuses on new products introduced to the dental
profession.
www.dentalproducts.net/publications/dpr.html
Diagnostic & Invasive Cardiology is
the widest-reaching provider of new product
information, technology and device information,
trends, performance and related connectivity
solutions in the diagnostic and interventional
cardiology markets. DAIC's 27,980 readers
include clinicians, technologists and department
chiefs/supervisors in cardiology, echo lab, cath
lab and electrophysiology departments plus
hospital administration, information technologists,
integrated healthcare delivery networks and group
purchasing organizations. www.dicardiology.net
HIDA 2010 Membership Directory and
Buyers Guide is a who's who directory of the
medical products supply chain. The Directory
includes a comprehensive listing of HIDA
distributor members by company, location, market,
and product specialties. It is a good resource for
finding new markets, product lines, and business
partners. www.hida.org/source/Orders/index.cfm?
section=EStore&ETask=1&Task=1&SEARCH_TY
PE=FIND&FindIn=0&FindSpec=membership+dir
ectory&x=8&y=7
Medical Device & Diagnostic Industry is a
monthly magazine written exclusively for original
equipment manufacturers of medical devices
and in vitro diagnostic products. The goal of
MD&DI is to help industry professionals develop,
design, and manufacture medical products that
comply with complex and demanding regulations
and market requirements. The publication has a
print circulation more than 48,000 and a digital
circulation of about 10,000.
www.canonmediakit.com/mddi
Medical Electronics Design is a semiannual
magazine written exclusively for engineers and
designers of medical electronic devices. It is the
only publication of its kind dedicated exclusively to
the medical electronics market. (Valued at about
$60 billion, medical electronics is the largest single
segment of the medical device industry). The goal
of MED is to help industry professionals develop,
design, and manufacture medical products that
comply with complex and demanding regulations
and market requirements. The annual Designers
Guide issue published in the fall provides articles
on a full range of design and engineering issues,
including electromagnetic compatibility, reliability,
testing, regulatory requirements, new technologies,

and component selection. The Buyers Guide issue
published each spring serves as a complete guide
to product sourcing, listing suppliers of electronic
components, systems, packaging and hardware,
instrumentation and power sources, production
equipment, and testing services and equipment, as
well as contract design and manufacturing firms.
Worldwide circulation is approximately 25,000.
www.devicelink.com/mem/index.html
Medical Product Manufacturing News
is a product tabloid magazine that provides
information on the new products and services
available to medical device manufacturers. The
publication is published ten times per year, and is
read by design engineering, manufacturing, and
specifying personnel who need accurate, up-to-date
information on materials, components, equipment,
and services. Total circulation is more than 49,000.
www.canonmediakit.com/mpmn
Medical Product Outsourcing (MPO)
covers the growing trend of medical device and
in-vitro diagnostics outsource manufacturing,
and includes comprehensive feature articles,
industry news, trends and other developments
pertinent to the CM-OEM relationship. The
publication examines the increasingly complex and
demanding requirements of managing outsourcing
partnerships. From regulatory mandates to market
shifts to legal concerns, each issue is filled with
relevant information to help device manufacturers
and their vendors stay informed about the industry.
The magazine has a circulation of 25,000 and is
published 12 times per year.
www.biotechmedia.com/y2005MedProdOutsource.
html
Orthopedic Design & Technology is focused
on the design and manufacturing of orthopedic
products and includes comprehensive feature
articles, industry news, trends and up-to-date
information on technological advances in this
fast-growing market segment. Departments and
columns discuss new products and services and
insights from orthopedic manufacturers and
suppliers. The magazine has a circulation of 7,500,
and is published 6 times per year.
www.biotechmedia.com/y2008OrthopedicDesignTech.html
ORTHOPEDICS is a monthly, peer-reviewed
journal, which offers clinically valuable, original
articles covering all aspects of adult and pediatric
orthopedic surgery and treatment. The publication
has been a leading choice of orthopedic surgeons
for clinically relevant information for over 25 years.
www.orthosupersite.com
PT in Motion is the professional issues magazine
of the American Physical Therapy Association. It
offers news, award-winning features, commentaries,
and columns written by experts to give an overview
129
of the profession. PT in Motion supports all those

involved in physical therapy including hospitals,
private practices, and top executives, and focuses
on the issues that concern them. It offers practical,
current information, pertinent to treatment and
to improving the quality of care. The magazine
accepts advertising and has a total circulation
of 69,143. www.apta.org//AM/Template.
cfm?Section=Current_Issue1
The Journal of Bone and Joint Surgery

is received and read by the largest number of
orthopaedic physicians worldwide. Orthopedic
surgeons look at more issues of JBJS, more
thoroughly, than any other publication in the field.
JBJS is also used more as a reference source than
any other orthopedic publication. The American
volume has a total circulation of 38,320.
www.ejbjs.org
Surgical Products is a premier source for news of

technological advances in the operating room. It is
read by the most important surgical professionals,
including surgeons, O.R. supervisors, related
department heads and O.R. purchasing/materials
management. It is the only publication that reaches
all of the 5,460 U.S. acute care hospitals, along with
private physician offices and ambulatory surgery
centers. The publication reaches 60,000 surgical
professionals. www.surgprodmag.com
The Journal of Thoracic and Cardiovascular

Surgery presents original, exclusive articles on
conditions of the chest, heart, lungs, and great
vessels where surgical intervention is indicated. An
official publication of The American Association
for Thoracic Surgery and The Western Thoracic
Surgical Association, the journal focuses on
techniques and developments in cardiac surgery,
pacemaker insertion/removal, lung and esophageal
surgeries, heart and lung transplantation, and other
procedures. The Journal ranks in the top 3.4% of
the 5,684 scientific journals most frequently cited
(Science Citation Index). www.aats.org
The American Journal of Cardiology

is an independent journal designed for
cardiovascular disease specialists and internists
with a subspecialty in cardiology throughout the
world. AJC is an independent, scientific, peerreviewed journal of original articles that focus on
the practical, clinical approach to the diagnosis
and treatment of cardiovascular disease. AJC
has one of the fastest acceptance to publication
times in Cardiology. Features report on systemic
hypertension, methodology, drugs, pacing,
arrhythmia, preventive cardiology, congestive
heart failure, valvular heart disease, congenital
heart disease, and cardiomyopathy. Also included
are case reports, brief reports, editorials, readers'
comments, and symposia. www.elsevier.com/
wps/find/journaldescription.cws_home/525048/
description#description
The American Journal of Occupational
Therapy is an official publication of the American
Occupational Therapy Association. The journal
publishes articles that are theoretical and conceptual
and represent theory-based research, research
reviews, and applied research related to innovative
program approaches, educational activities, and
professional trends. AJOT also offers advertising
opportunities that can benefit all types of physical
therapy product and service related companies.
AJOT is published 6 times per year and reaches
about 40,000 OT Practitioners.
www1.aota.org/ajot/index.asp
The Journal of the American Academy of
Orthopedic Surgeons is the official journal of
the American Academy of Orthopedic Surgeons.
The Journal has a circulation of about 31,527
and includes Orthopedic Surgeons and Residents,
Osteopaths and also Allied Health and Education
professionals. www.jaaos.org/misc/display.pdf
19.3. ANNEX III - LIST OF MEDICAL

ACADEMIES, SOCIETIES, AND OTHER
PLATFORMS
Academy of Osseointegration:
www.osseo.org
American Academy of Allergy Asthma &
Immunology: www.aaaai.org
American Academy of Child & Adolescent
Psychiatry: www.aacap.org
American Academy of Cosmetic Surgery:
www.cosmeticsurgery.org
American Academy of Dermatology: www.aad.org
American Academy of Facial Plastic and
Reconstructive Surgery: www.aafprs.org
American Academy of Family Physicians:
www.aafp.org
American Academy of Hospice & Palliative
Medicine: www.aahpm.org
American Academy of Insurance Medicine:
www.aaimedicine.org
American Academy of Neurology: www.aan.com
American Academy of Ophthalmology:
www.aao.org
American Academy of Orthopaedic Surgeons:
www.aaos.org
American Academy of Otolaryngic Allergy:
www.aaoaf.org
130
American Academy of Otolaryngology - Head and

Neck Surgery: www.entnet.org
American College of Medical Genetics:

www.acmg.net
American Academy of Pain Medicine:

www.painmed.org
American College of Medical Quality:

www.acmq.org
American Academy of Pediatrics:

www.aap.org
American College of Nuclear Medicine:

www.acnponline.org
American Academy of Private Physicians:

www.aapp.org
American College of Occupational and

Environmental Medicine: www.acoem.org
American Academy of Physical Medicine &

Rehabilitation: www.aapmr.org
American College of Physician Executives:

www.acpe.org
American Academy of Psychiatry & the Law:

www.aapl.org
American College of Physicians: www.acponline.org
American Academy of Sleep Medicine:

www.aasmnet.org
American Association for Hand Surgery:
www.handsurgery.org
American Association for Thoracic Surgery:
www.aats.org
American Association of Clinical Endocrinologists:
www.aace.com
American Association of Clinical Urologists:
www.aacuweb.org
American Association of Neuromuscular and
Electrodiagnostic Medicine: www.aanem.org
American Association of Gynecological
Laparoscopists: www.aagl.com
American Association of Hip & Knee Surgeons:
www.aahks.org
American Association of Neurological Surgeons:
www.aans.org
American Association of Oral & Maxillofacial
Surgeons: www.aaoms.org
American Association of Plastic Surgeons:
www.aaps1921.org
American Association of Public Health Physicians:
www.aaphp.org
American Clinical Neurophysiology Society:
www.acns.org
American Academy of Allergy, Asthma, &
Immunology: www.aaaai.org
American College of Preventive Medicine:

www.acpm.org
American College of Radiation Oncology:
www.acro.org
American College of Radiology:
www.acr.org
American College of Rheumatology:
www.rheumatology.org
American College of Surgeons:
www.facs.org
American Congress of Obstetricians and
Gynecologists: www.acog.com
American Gastroenterological Association:
www.gastro.org
American Geriatrics Society:
www.americangeriatrics.org
American Institute of Ultrasound in Medicine:
www.aium.org
American Medical Directors Association:
www.amda.com
American Medical Group Association:
www.amga.org
American Occupational Therapy Association:
www.aota.org
American Orthopaedic Association:
www.aoassn.org
American Orthopaedic Foot and Ankle Society:
www.aofas.org
American College of Cardiology: www.acc.org
American Pediatric Surgical Association:

www.eapsa.org
American College of Chest Physicians:

www.chestnet.org
American Physical Therapy Association:

www.apta.org
American College of Emergency Physicians:

www.acep.org
American Psychiatric Association: www.psych.org

American Roentgen Ray Society: www.arrs.org
American College of Gastroenterology:

http://www.acg.gi.org/
131
American Society for Aesthetic Plastic Surgery:

www.surgery.org
AMSUS, the Society of the Federal Health

Agencies: www.amsus.org
American Society for Clinical Pathology:

www.ascp.org
Association of University Radiologists: www.aur.org
American Society for Dermatologic Surgery:

www.asds.net
College of American Pathologists: www.cap.org

Congress of Neurological Surgeons: www.cns.org
American Society for Gastrointestinal Endoscopy:

www.asge.org
Contact Lens Association of Ophthalmologists:

www.clao.org
American Society for Reproductive Medicine:

www.asrm.org
International College of Surgeons United States

Section: www.ficsonline.org
American Society for Surgery of the Hand:

www.hand-surg.org
International Spine Intervention Society:

www.spinalinjection.com
American Society for Radiation Oncology:

www.astro.org
National Association of Medical Examiners:

www.thename.org
American Society of Abdominal Surgeons:

www.abdominalsurg.org
National Medical Association: www.nmanet.org
American Society of Addiction Medicine:

www.asam.org
American Society of Bariatric Physicians:
www.asbp.org
American Society of Cataract and Refractive
Surgery: www.ascrs.org
American Society of Clinical Oncology:
www.asco.org
North American Spine Society: www.spine.org

Radiological Society of North America:
www.rsna.org
Society for Investigative Dermatology:
www.sidnet.org
Society of American Gastrointestinal Endoscopic
Surgeons: www.sages.org
Society of Critical Care Medicine: www.sccm.org
American Society of Colon and Rectal Surgeons:

www.fascrs.org
Society of Interventional Radiology:

www.sirweb.org
American Society of Cytopathology:

www.cytopathology.org
Society of Medical Consultants to the Armed

Forces: www.smcaf.org
American Society of General Surgeons:

www.theasgs.org
Society of Nuclear Medicine: www.snm.org
American Society of Hematology:

www.hematology.org
Society of Radiologists in Ultrasound: www.sru.org

Society of Thoracic Surgeons: www.sts.org
American Society of Maxillofacial Surgeons:

www.maxface.org
Society for Vascular Surgery:

www.vascularweb.org
American Society of Neuroimaging:

www.asnweb.org
The Triological Society: www.triological.com

United States & Canadian Academy of Pathology:
www.uscap.org
American Society of Neuroradiology:

www.asnr.org
American Society of Ophthalmic Plastic
and Reconstructive Surgery: www.asoprs.org
American Society of Plastic Surgeons:
www.plasticsurgery.org
American Society of Retina Specialists:
www.asrs.org
American Thoracic Society: www.thoracic.org
American Urological Association : www.auanet.org
132
19.4. End Notes

1.
Englander, JW and Seligman, PM;Standard & Poors Industry Surveys: Healthcare: Products & Supplies, February
4, 2010.
2.
Business Monitor International, 2010.
3.
CMS: national Health Expenditure Projections 2009-2019(September 2010), https://www.cms.gov/

nationalHealthExpendData/Downloads/NHEProjections2009to 2019.pdf
4.
http://links.heritage.org/hostedemail/email.htm?h=2d87a570f962a7bbda7b5393ad924089&CID=7937511093&ch=
F23BC7B57C78F60DB1C54EF68E7B050B
5.
Ohmes, C. Pulse of the Industry. Medical technology report 2010.
6.
Rastogi, S. Medical Technology Innovation in a Time of Upheaval PRTM.
7.
FDA Impact on U.S. Medical Technology Innovation: A Survey of Over 200 Medical Technology Companies, by
Josh Makowe, Aabed Meer, and Lyn Denend, Stanford University, November 2010, http://www.advamed.org/NR/
rdonlyres/040E6C33-380B-4F6B-AB58-9AB1C0A7A3CF/0/makowerreportfinal.pdf
8.
Das U.S. Markt Paradoxon by Dr. Marvin Baker, High Technology Associates http://www.high-technologyassociates.de/
9.
InnoNation Schweiz, Aktionsplan des Eidgenssischen Volkswirtschaftsdepartements fr Innovation und

Unternehmertum, Juni 2003
10. USA Medical Device Market Intelligence Report- Espicom Healthcare Intelligence January 31, 2010
11. Value of deals for medical technology firms rises by David Olmos, Bloomberg News, October 20, 2010 online
reference: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/10/19/BU8D1FUJFM.DTL&feed=rss.business
12. Medical Device M&A Activity up 154%, by Growthink, Feb. 15, 2010, online reference: www.growthink.com/
print/content/medical-device-ma-activity-154
13. M&A Market Rebounds from Lows by Clyde A. Burkhardt, HT Capital, LLC and MDDI Magazine, December 1,
2009 online reference: www.mddionline.com/print/6738
14. VC Heats Up, Sort Of, by Tomio Geron, The Wall Street Journal, July, 22, 2010, p. B6
15. Economy improves, but medical device IPO market still flounders, The Free
Library by Farlex, May 1, 2010, online reference: http://www.thefreelibrary.com/
Economy+improves,+but+medical+device+IPO+market+still+flounders%3A...-a0227652528
16. 2007 Economic Census: Economy-wide Key Statistics: 2007, U.S. Census Bureau http://factfinder.census.gov/
servlet/IBQTable?_bm=y&-geo_id=&-ds_name=EC0762I1&-_lang=en
17. Kaiser Family Foundation,online reference: http://facts.kff.org/chart.aspx?ch=1390
18. Health Costs Could Balloon as Baby Boomers Age, Press Release by Watson Wyatt Worldwide, http://www.
watsonwyatt.com/news/press.asp?ID=6958
19. Centers for Medicare and Medicaid Services, Highlights National Health Expenditures-2009, online posting
January 2011: http://www.cms.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.
asp#TopOfPage
20. Centers for Medicare and Medicaid Services, Highlights National Health Expenditures, 2009 online posting:
January 2011 http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/highlights.pdf
21. Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. January 2011
22. American Heart Association, Heart Disease and Stroke Statistics 2011 Update.
23. American Heart Association. Heart Disease and Stroke Statistics 2011 Update, p. e182. http://circ.ahajournals.
org/cgi/reprint/CIR.0b013e3182009701
24. Standard & Poors: Healthcare Industry: Products & Supplies, April 2007
25. Heart-Valve Win May Prod J&J, Abbott to Buy Companies, by David Olmos, Bloomberg, November 10, 2010
online reference: http://www.bloomberg.com/news/2010-11-10/heart-valve-win-may-prod-j-j-abbott-to-shop-fortechnology.html
26. Boston Scientific 2009 Annual Report
27. Standard & Poors Surveys Healthcare: Products & Supplies, February 4, 2010
28. Drug-coated stents safe for large heart arteries, by Debra Sherman and Ransdell Pierson, Reuters, November 16,
2010, online reference: http://www.reuters.com/article/idUSTRE6AF2ZF20101116
29. Diabetes Study Questions Expensive Treatments, The Wall Street Journal, June 8, 2009 p. B1
30. Boston Scientific Press Release, May 24, 2010
133
31. Medtronic to Roll Out 60Major Products, by Jon Kamp, The Wall Street Journal, June 8, 2010, p. B6
32. Edwards Lifesciences Corp. Press Release January 25, 2010
33. Medtronic Press Release March 17, 2010
34. Abbott Laboratories Press Release March 15, 2010
35. Edwards Lifesciences. Press Release March 2, 2010
36. Bioheart, Inc. online reference, http://www.bioheartinc.com/about.php http://www.bioheartinc.com/products.html
37. Osiris Therapeutics, online reference, http://investor.osiris.com/
38. San Diego Stent Maker Will Test Device In People by Keith Darce, Union Tribune, August 19, 2010 online
reference: http://www.signonsandiego.com/news/2010/aug/19/san-diego-stent-maker-will-test-device-people/
39. St. Jude Medical Press Release, May 12, 2010
40. Standard & Poors Industry Survey Healthcare: Products & Supplies, February 4, 2010
41. The burden of musculoskeletal diseases in the United States: www.usbjd.org, 2008
42. Stryker Corp. 2009-2010 Fact Book
43. Standard & Poors Surveys Healthcare: Products & Supplies, February 4, 2010
44. Fit Future for Hip, Knee Makers, The Wall Street Journal, March 6, 2007, p. C1 and Total Hip Replacement:
What you Need to Know by Carol Eustice, May 18, 2008, online reference: http://osteoarthritis.about.
com/b/2008/05/18/total-hip-replacement-what-you-need-to-know.htm
45. PearlDiver http://www.pearldiverinc.com/pdi/code_results.jsp?code=81.54&x=36&y=26
46. American Academy of Orthopedic Surgeons www.aaos.org
47. Keeping Tabs on Implants, by Jon Kamp, The Wall Street Journal, October 13, 2010 online reference: http://
online.wsj.com/article/SB10001424052748704164004575548121765310614.html?mod=dist_smartbrief
48. CDC National Center for Injury Prevention and Control http://www.cdc.gov/ncipc/factsheets/scifacts.htm
49. Merritt, Hawkins & Associates 2010 Physician Inpatient/Outpatient Revenue Survey http://www.merritthawkins.
com/pdf/2010revenuesurvey.pdf
50. A good overview of 510(k) approved orthopedic products is available at https://www.orthoworld.com. Membership
at orthoworld is recommended for all interested in the U.S. orthopedic industry.
51. FDA impact on U.S. Medical technology Innovation: A Survey of Over 200 Medical Technology Companies
November 2010
52. Medical Device Technology Forecast 2008, Future Trends in Medical Device Technologies, William A. Herman and
Gilbert B. Devey. Center for Devices and Radiological Health, January 3, 2011
53. Specialty Update: Whats new in spine surgery by Keith H. Bridwell et al J Bone Joint Surg. Am. 2010;92:2017-28
54. Official Journal of the European Communities L331/1 de 7 december 1998
55. Molecular Diagnostic Market Heating Up, by K.K. Jain, MD, Genetic Engineering & Biotechnology News, April
1, 2010, online reference: http://www.genengnews.com/gen-articles/molecular-diagnostic-market-heatingup/3234/?page=1
56. Ibid.
57. Ibid.
58. Fully Automated MDx: Automated platforms address the needs of multiplexing and personalized medicine for any
size laboratory, by Carl T. Wittwer, MD, PhD, Advance Laboratory, April 13, 2010 online posting: http://laboratorymanager.advanceweb.com/Archives/Article-Archives/Fully-Automated-MDx.aspx
59. BD Diagnostics Press Release June 2, 2010
60. Gene Test for Tumors Offers Hope of Aiding Treatment, by Ron Winslow, The Wall Street Journal, February 19,
2010, p. A3
61. NinePoint Medical drums up $33 million MassDevice, October 14, 2010, online reference: http://www.
massdevice.com/news/ninepoint-medical-drums-33-million
62. New Chip Captures Specialized Immune Cells, by Emily Singer, MIT Technology Review, September 8, 2010
online reference http://www.technologyreview.com/biomedicine/26231/?a=f
63. Device could aid detection of flesh-killer, Clarionledger.com, November 8, 2010, online reference: http://www.
clarionledger.com/article/20101108/NEWS/11080312/Device-could-aid-detection-of-flesh-killer
64. Iris International Press Release, May 18, 2010
134
65. GE Is Latest to Make Handheld Ultrasound, by Paul Glader, The Wall Street Journal, February 12, 2010, p. B1
66. 3D Real-Time Medical Imaging Dominion Vi 3D Medical Imaging Scanner Medical Imaging Technology, online
reference http://www.medicalnewstoday.com/articles/111411.php, June 16, 2008
67. Hologic press release, February 11, 2011 http://www.hologic.com/en/news-releases/173-id.234881803.html
68. GE to develop sequential PET+ MR imaging online reference: Healthimaging.com, October 11, 2010
69. Medtronic Press Release April 26, 2010
70. SonoSite Press Release, May 27, 2010
71. Patterson Companies, Inc. Fiscal 2010 10k annual report
72. Horizon Health Corp. online reference http://www.horizonhealth.com/prs/programs/index.php
73. Invacare Corp. 2009 annual report
74. North American Dental Devices Market Outlook to 2016, December 2010 www.medicaletrack.com
75. Dental Implant Market to Recover from Economic Crisis by 2010, Osseo News, online reference: http://www.
osseonews.com/drosseo/content/78779-dental-implant-market-recover-economic-crisis-2010
76. The American Way of Dentistry: The Oral Cost Spiral, by June Thomas, Slate.com, September 29, 2009 online
reference: http://www.slate.com/id/2229632/
77. Paradigm Stretch, by Richard Palmer, Dental Products Report, March 10, 2008
78. New Twists on Implants, by Richard Palmer, Dental Lab Products, September 2009
79. Dental Products Report: Materials Survey, by Stan Goff, March 2008 online reference http://www.dprworld.com/
articles/show/dpr0308_tid_materials-survey
80. Dental Products Report: Patient Education, by Stan Goff, August 2008 online reference http://www.dprworld.
com/articles/show/dpr0808_tr_patient-education
81. Sirona Dental Systems Inc: 2010 Annual Report 2010, Form 10-K p.5
82. Concept: CAD/CAM, by Pam Johnson, Dental Lab Products, March 2009
83. Tech Tomorrow: 3D Virtual Patient, by Stan Goff, Dental Lab Products, Tech Guide 2010, online reference: http://
www.dentalproductsreport.com/articles/show/dlp0710_TechTomorrow-Lead
84. Drug-Device Combinations: The Global Market BCC Research, January 2010
85. The Value of Group Purchasing - 2009: Meeting the Needs for Strategic Savings, by Eugene S. Schneller, Ph.D.,
online reference: http://www.higpa.org/assets/1/workflow_staging/AssetManager/235.PDF
86. Miller, Richard K., 2008 Healthcare Business Market Research Handbook, June 12, 2008
87. Introduction to Consulting Services by Lisa King, Ron Warren, and Gail Radcliffe, IVD Technology, October 2009,
online reference: http://www.ivdtechnology.com/article/consulting-services-10
88. SR 0.672.933.61
89. FDA to review medical products alongside Medicare Reuters, September 17, 2010 online reference: http://www.
reuters.com/article/idUSTRE68F3F320100916
90. Centers for Medicare and Medicaid, online Medicare Information Resource http://www.cms.hhs.gov/home/
medicare.asp
91. Centers for Medicare and Medicaid, online Medicare Information Resource http://www.cms.gov/ICD10/
92. Push to Compare Treatments Worries Drug, Device Makers, by Jane Zhang, The Wall Street Jouranal, April 14,
2009, pA5
93. Blue Cross Plans Feeling Pressure to Consolidate The Wall Street Journal, August 25, 2008 p. B7
94. Understanding the Affordable Care Act: Timeline: Whats Changing and When, online reference: http://www.
healthcare.gov/law/timeline/index.html
95. New healthcare model: Accountable Care Organizations, by Tim Eaton, American Statesman, September 21,
2010, online reference: http://www.statesman.com/news/texas-politics/new-health-care-model-accountable-careorganizations-930378.html?viewAsSinglePage=true
96. Coverage Descriptions obtained from the Centers for Medicare and Medicaid, online Medicare Information
Resource, http://www.cms.hhs.gov/center/coverage.asp
97. Standard & Poors Industry Survey Healthcare: Products & Supplies, February 4, 2010 and Stryker Corp, 20092010 Fact Book
98. Reprocessed Single-Use Medical Devices from the US Government Accountability Office (GAO), January 2008
99. OEMs Best Third Parties With Own Reprocessing Programs by Shannon Tillman, Orthopedic Design &
Technology, September 2005, online reference: http://www.odtmag.com/articles/2005/09/reprocess.php
100. FDA online reference: http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/ReprocessingofSingleUseDevices/ucm121218.htm
135
101. 21 USC 301 et.seq.

102. P.L. 94-295
103. The Safe Medical Device Amendments of 1990 (Pub. L. 101-629); The Food and Drug Administration Modernization
Act (Pub.L.107-250)
104. 21 USC 331 et. seq.
105. 21 USC 381
106. See Generally 21 USC 501 et. seq. and 21 CFR Parts 800-898
107. As discussed infra, not all devices require a premarket submission.
108. 21 USC 360 [Note the premarket approval application can be accomplished through a product development
protocol (PDP) which is an alternative process which can result in premarket approval.]
109. 21 USC 360(k)
110. 21 USC 360 bbb-2
111. 21 USC 353(g)
112. 21 CFR 3.1 et.seq.
113. 21 USC 321(h)
114. 21 CFR Part 880 et. seq.
115. 21 USC 360c
116. 21 CFR Part 862 et. seq.
117. 21 USC 360c(f)
118. 21 USC 360c(f)(2)
119. 21 USC 360(k)
120. 21 CFR 807.81
121. 21 CFR 807.87-807.94
122. 21 USC 360(i)
123. See FN 21
124. See FN 21
125. 75 FR 45641, August 3, 2010
126. 21 USC 360m
127. 21 USC 360e
128. 21 CFR Part 814
129. 21 CFR Part 812
130. 21 CFR 812.15
131. See FN 25
136
19.5. ANNEX IV: THE AUTHORS OF THE STUDY

Paul S. Anderson is a partner in the Chicago law firm of Sonnenberg & Anderson, a specialty practice
focused solely on Customs and related international trade matters, and he has practiced exclusively in this
area for over 30 years. He received a BA degree from Wake Forest University in Winston-Salem, North
Carolina; a JD degree from IIT / Chicago-Kent College of Law; and also participated and received
certification in the UOP / McGeorge School of Law, European Post-Graduate Program in International
Studies based in Salzburg, Austria including study at the University of Salzburg and an internship with a
law firm in Sweden. He is admitted to the bar in Illinois and is a member of the American Bar Association
and the Customs and International Trade Bar Association (CITBA). From 2005 to the present he has been
president of the International Trade Association of Greater Chicago (ITAGC), as well as a member of the
Swiss-American Business Council in Chicago. Since 2000, he has been Hon. Consul General for Norway
to Chicago and Illinois. Contact: psa@sonnander.com
Richard M. Franklin, Partner, Baker & McKenzie, a native of Chicago, is a graduate of the Columbia
University School of Law and also attended the University of Wisconsin and the University of Freiburg,
Germany. He has practiced law for over thirty years. His practice focuses on business and commercial
litigation, including product liability litigation. Because Mr. Franklin speaks German fluently and is familiar
with the laws and business practices of Germany, Switzerland and Austria, a great deal of Mr. Franklin's
practice involves the representation of clients from those countries in U.S. litigation or arbitration. For
example, Mr. Franklin was the lead defense counsel for a major Swiss medical implement manufacturer
in the defense of product liability claims resulting from allegedly defective orthopedic products designed,
manufactured and sold by its U.S. subsidiary.
Contact: Richard.Franklin@bakermckenzie.com
David Kouidri, worked as the Trade Commissioner of Switzerland, and a member of Swiss Federal
Ministry of Foreign Affairs, from January 1998 to June 2005. As an expert in industry promotion initiatives
and new market development, Mr. Kouidri marketed Swiss industries and business in the U.S. Among
other areas of concentration, Mr. Kouidri initiated numerous high technology based facilitation efforts,
specifically in the field of nanotechnology, biotechnology, machinery manufacturing and the environment.
He was also a key initiator for the now famous Cows on Parade program that took place in Chicago in
1999. He has been the lead advisor to over 60 Swiss companies regarding entry strategy into the US. Prior
postings in the private and public sectors include, Vienna, Austria, Paris France, Annapolis Maryland, and
Geneva Switzerland, where he worked for the United Nations. Mr. Kouidri holds an MBA in International
Business from DePaul University Kellstadt Graduate School of Business in Chicago, and a Bachelor of
Science in Marketing from Bentley College in Boston. He is fluent in German and has good knowledge of
French. Contact: dkouidri@sbcglobal.net
John Lemker is a member of the Wood Burditt group where he concentrates his practice in regulatory
law relating to the food, drug and medical industries and transportation and automotive industries. Mr.
Lemker has represented clients before the FDA, the USDA, the FTC and State Regulatory Agencies.
He has counseled firms in the food and healthcare industries regarding compliance with regulatory
requirements. Mr. Lemker is the former chair of the Chicago Bar Association Food, Drug, and Consumer
Products Committee. He has served as an adjunct Professor of Law at Northwestern University School of
Law. He received both his B.A. and J.D at Northwestern University. Mr. Lemker can be reached via email:
jflemker@woodburditt.com, phone: 847-234-7500 x 202, or e-fax: 847-574-0728.
Scot Orgish has been involved in international business for over 25 years, and has worked in both the
private and public sectors. As Trade Commissioner for the Swiss Business Hub, he has advised numerous
Swiss companies about entering the U.S. market, and provided individualized market research and partner
search services. He is also a key contributor to the Hubs industry studies such as the Biotech Study which
was presented in 2006. Prior to joining the Swiss Business Hub, he worked for Martek & Associates, a
private consulting firm that specialized in international marketing and acquisitions. He also worked as
a manufacturers agent in Germany and Puerto Rico where he was involved with sales and distribution
of consumer products to the U.S. militarys resale system. Mr. Orgish has two Masters Degrees from the
University of Texas at Dallas including an MBA in Finance and an MA in International Management. He
also has an undergraduate degree in Marketing from Texas Tech University. Contact:
scot@swissbusinesshub.org
Erwin Locher became the first president of Medtech Switzerland in 2010. He also serves as a board
member and advisor to several public and private medical technology companies in Switzerland. Until
the completion of the merger between Synthes, the world leader of fracture management and major
company in the spinal market, and Mathys Medical in 2004, he was CEO of the Synthes Division. Before
joining the Synthes group of companies in 1996, he was President of Allo Pro, a European leader in joint
137
arthroplasty that eventually was merged into Sulzermedica and Zimmer. Mr. Locher holds a degree in
Economics from the University of Basel and an MBA from the Rotmann Business School in Toronto.
Contact: erwin.locher@medtech-switzerland.com
Patricia K. Scheller is a Senior Advisor for Medtech Switzerland for the U.S. market. Ms. Scheller
also serves as the CEO of Prescient Medical, Inc. an interventional cardiology company. Prior to joining
Prescient Medical, she served as CEO of Somalogic, Inc., a proteomic company developing protein signature
arrays. Ms. Scheller also managed several business units at Ortho-Clinical Diagnostics and was director of
cardiology systems at Cordis, a Johnson & Johnson company. There she was responsible for launching the first
PALMAZ-SCHATZ Stent. Ms. Scheller also served in key executive positions at Dade Behring, a clinical
diagnostics firm. She received her BSE degree in Biomedical Engineering from Duke University and has
completed executive education programs at the Massachusetts Institute of Technology, Harvard, Columbia
and Northwestern Universities. Contact: p.scheller@medtech-switzerland.com
Frank Ustar is Deputy Director of the Swiss Business Hub USA and Trade Commissioner for Los Angeles.
Mr. Ustar holds a BA in Economics and a MA in Marketing. Before joining the Swiss government in 1984,
Mr. Ustar worked as a Research Associate for Ohio State University. Prior he held various positions in the
private sector. Mr. Ustar can be reached via email at: frank@swissbusinesshub.org, Tel 310 575 1145 or Fax
310 575 1982.
Martin von Walterskirchen, Regional Director of the Americas and Director of Swiss Business
Hub USA, is a graduate (honors) of the University of St.Gallen, Switzerland. Previously he has served
as Councilor of the Swiss Embassy in Moscow, Swiss Chief Negotiator for Services (GATS) during the
Uruguay Round of the GATT, General Secretary of the Swiss Federal Office for foreign economic affairs,
and Personal Advisor to the Swiss Minister of Justice and Police, and to the Swiss President. On September
21, 2001 the Swiss Government conferred upon him the title of Minister. Contact:
martin@swissbusinesshub.org
Daniel A. Wuersch, is the Managing Partner of Wuersch & Gering LLP, an international boutique firm
with 15 lawyers in New York. His practice focuses on corporate law, mergers & acquisitions, corporate
finance and strategic partnerships and marketing agreements. He is admitted to the bar in New York and
Zurich, Switzerland. He acquired his Dr. iur. degree at the University of Zurich Switzerland in 1989. In
1991, he obtained an LL.M. degree at the Georgetown University Law Center, Washington, D.C. In
addition, he attended graduate and post-graduate courses in international law and EU law at the University
of Lausanne, Switzerland and the London School of Economics. Prior to co-founding Wuersch & Gering
LLP in 1997, he practiced international corporate and securities law with Morgan Lewis & Bockius (19961997) and Fried, Frank, Harris, Shriver & Jacobson (1991-1996) in New York, as well as Homburger /
Baker & McKenzie in Zurich, Switzerland (1988-1990). He has written and co-authored books and articles
on United States and Swiss corporate and contract law and the law of the European Union. Mr. Wuersch
is a frequent speaker on legal issues involving business activities of foreign companies in the United States.
He is the President of the Swiss Society of New York and a member of the Chapter Board Doing Business
in USA of the Swiss American Chamber of Commerce. Contact: daniel.wuersch@wg-law.com
Other Reports of Swiss Business Hub USA
Doing Business in the United States A Handbook for Swiss Business Women, by Ally
Gunduz with contributions by Suzanne H. Ambrose, Ursula Day, Monika Howden, Karen Monroe, and
Karin Vibe-Stewart
The US Market for Biotechnology Opportunities and Challenges for Swiss Companies,
by Daniel Bangser, with contributions by W. David Braun, Richard M. Franklin, Claudine M. Haeni, John
F. Lemker, Scot Orgish, Ulice Payne Jr, Michael S. Rosen, Donald J. Silvert, Frank Ustar, and Martin von
Walterskirchen
The US Food Industry Opportunities and Challenges for Swiss Companies, by Claudine M.
Haeni, with contributions by Paul S. Anderson, Ally Gunduz, John F. Lemker; Frank Ustar, Martin von
Walterskirchen, and Daniel A. Wuersch
The Automotive Industry by Kimberly Corradi
The US Nanotechnology Environment Where is the Business, by Philipp H. Buff
138
Medtech Switzerland
Wankdorffeldstrasse 102
Postfach 261
CH- 3000 Berne 22
Phone +41 31 335 62 39
Fax +41 31 335 62 63
www.medtech-switzerland.com
Medtech Switzerland is an initiative of the Swiss
government, Osec and the Medical Cluster to promote
the export of medical technology to key world markets.

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Opportunities & Challenges for Swiss Companies.